Susan used to work as a telemarketer,earning $25,000 per year.She gave up that job to start a catering business.In calculating the economic profit of her catering business,the $25,000 income that she gave up is counted as part of the catering firm's

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The $25,000 income that Susan gave up by quitting her previous job is an opportunity cost. Opportunity cost is the value of the next best alternative that must be forgone in order to pursue a certain action or decision, in this case, the decision to start a catering business. Therefore, the economic profit of her catering business should take into account this opportunity cost, which is a part of explicit costs.

Susan Used to Work as a Telemarketer,earning $25,000 Per Year