2. You own and operate a bike store. Each year, you receive revenue of $200,000 from your bike sales, and it costs you $100,000 to obtain the bikes. In addition, you pay $20,000 for electricity, taxes, and other expenses per year. Instead of running the bike store, you could become an accountant and receive a yearly salary of $40,000. A large clothing retail chain wants to expand and offers to rent the store from you for $50,000 per year. How do you explain to your friends that despite making a profit, it is too costly for you to continue running your store

Economic profit is negative

Explanation:

The difference between accounting and economic profit is that economic profit includes notional profit or implicit profit/loss, referred to as opportunity cost.

Opportunity cost refers to the benefits foregone of opting for an alternative when another alternative is chosen instead.

In the given case, Accounting profit = Revenues - Costs

Accounting Profit = $200,000 - ($100,000 + 20,000)

Accounting Profit = $80,000

Economic Profit = Accounting profit - Implicit Costs

Economic Profit = $80,000 - (40,000 + 50,000)

                            = ($10,000)

Here, the salary foregone of $40,000 and rent foregone of $50,000 represents implicit or opportunity cost.

Thus, economic loss of $10,000 makes the option of running the bike store  non viable.

employers prefer to hire ingenious, resourceful people because ingenious people may be more liable to engage in unethical deportment as they can cerebrate outside of the box