Because you turned down a job with a brokerage firm at $40,000
per year to start your own business this forgone income must
be considered an economic cost. So, even though your personal income comes to $60,000, in order to compute
your earned economic profit, we must subtract the forgone income
of $40,000; this leaves you with an economic profit of $20,000. Therefore,
the business is successful. Suppose you had given up a job paying
$75,000; then your loss would have been $15,000 having
been better off taking the job.
Keep in mind that economists always think of profit and loss
in this way.
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