Now that we understand economic costs, let's be sure we understand economic profit. After all, the profit motive is supposed to be the driving force in our economy. Whether it is or not, we still need to be sure we understand profit, in order to understand the role it plays. Certainly, it's safe to assume that businesses are concerned with profit, whether or not it's their sole concern.

Simply put, economic profit is just what you would think: economic profit = revenue - economic cost.

Revenue is an easy concept. It is just the total amount of money received for goods and/or services provided. Economic cost we've already defined, but it is our definition of economic cost that makes an economist's idea of profit differ a bit from how "profit" is normally used. The following example will help...

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