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In Economics, a firm is said to be making an economic profit when its average total cost is less than the price of the product or service at the profit-maximizing output. The economic profit is equal to the quantity output multiplied by the difference between the average total cost and the price. Wikipedia does not have an article with this exact name. ... Profit is defined as the residual value gained from business operations. ... U.S. Economic Calendar Economics at the Open Directory Project Economics textbooks on Wikibooks The Economists Economics A-Z Institutions and organizations Bureau of Labor Statistics - from the American Labor Department Center for Economic and Policy Research (USA) National Bureau of Economic Research (USA) - Economics material from the organization... In economics, profit maximization is the process by which a firm determines the price and output level that returns the greatest profit. ... Profit is defined as the residual value gained from business operations. ...

Economic profit differs from standard profit in that it is considered the actual profit over and above the profit which is purely attributed to the investor's money being tied up in the venture. It is accepted that any investment requires some profit to make a venture worthwhile, and economists refer to this as accounting profit which covers the opportunity costs of a venture. Economic profit then looks at the equity investors have used and the level of risk of the investment to come up with a required return. Economic profit, then, is any earnings above this required level. It is seen as beneficial as it focuses management on giving priority to projects where the return is high relative to the risk taken and capital consumed. This contrasts with accounting profit which looks at earnings with no reference to equity use or risk. Theoretically a state of perfect competition would see no economic profit, for if any exists in an industry it will attract new investors and start-ups until all economic profit disappears. In accounting terms, accounting profit is the total revenue minus costs properly chargeable against the goods sold (Ref. ... Opportunity cost is a term used in economics, to mean the cost of something in terms of an opportunity foregone (and the benefits that could be received from that opportunity), or the most valuable foregone alternative. ... Perfect competition is a model in economic theory. ...

Long-lasting economic profit is thus viewed as an inefficiency caused by monopolies or some other form of market failure. The term inefficiency has several meanings depending on the context in which its used: Economic inefficiency refers to a situation where we could be doing a better job, i. ... This article is about economic monopoly. ... In economics, a market failure is a situation in which markets do not efficiently organize production or allocate goods and services to consumers. ...

Economic profit is sometimes referred to as supernormal profit. Abnormal profit, also referred to as supernormal profit, is an economic term of profit exceeding the normal profit. ...

In accounting, economic profit, or EP, is a single-period metric to determine the value created by a company in one period - usually a year. Accountancy (British English) or accounting (American English) is the process of maintaining, auditing, and processing financial information for business purposes. ...

EP = Net Earnings - Equity Charge

= (ROE - COE) * Equity

where

ROE = Return on Equity

COE = Cost of Equity

= Risk-free Rate + (β · Equity Risk Premium)

Economic profit versus accounting profit

Economists measure a firm’s economic profit as total revenue minus total cost, including both explicit and implicit costs.

Accountants measure the accounting profit.

When total revenue exceeds both explicit and implicit costs, the firm earns economic profit.

Economic profit is smaller than accounting profit.

There are commentators who see benefit in making adjustments to economic profit such as eliminating the effect of amortised goodwill or capitalising expenditure on brand advertising to show it's value over multiple accounting periods. The underlying concept was first been introduced by Schmalenbach, but the commercial application of the concept of adjusted economic profit was by Stern Stewart & Co. which has trade-marked their adjusted economic profit as EVA or Economic Value Added. Economic Value Added (EVA) is often defined as the value of an activity that is left over after subtracting from it the cost of executing that activity and the cost of having lost the opportunity of investing consumed resources in an alternative activity. ...