Economic profit

A firm's economic profit is the difference between its revenue and the return to those inputs in their best alternative use. In particular, the cost component of profit is the economic cost, or the opportunity cost of the inputs: the best alternative return from these inputs. (Note that economic cost is different from accounting cost: an accountant may base the value the capital equipment of the firm, for example, on its original cost adjusted by depreciation. This accounting cost may be small if the equipment is old, but the economic cost of the equipment may nonetheless be significant---even though the accountant gives it a small value, it may be capable of earning a significant return if it is rented out or sold, and this return is its economic cost.