Final answer:
Economic profit is not equal to total revenue minus opportunity cost. It is calculated by subtracting both the explicit and implicit costs from the total revenue.
Step-by-step explanation:
Economic profit is not equal to total revenue minus opportunity cost. It is calculated by subtracting both the explicit and implicit costs from the total revenue. The formula for economic profit is: Economic profit = total revenue - explicit costs - implicit costs.
For example, let's say a firm has a total revenue of $200,000, explicit costs of $85,000, and implicit costs of $125,000. By plugging these values into the formula, we can calculate the economic profit as follows: Economic profit = $200,000 - $85,000 - $125,000 = -$10,000 per year. This means that the firm is making a loss of $10,000 per year.