If the owner of the Table 81 drugstore hired a manager for 1

If the owner of the Table 8.1 drugstore hired a manager for $12.00 an hour to take his place, how much of a change would show up in a) Accounting profits? b) Economic profits?   From book The Micro Economy Today 12e, chapter 8 problem 1.

Solution

a) $12 because the salary of woner is not inclded in cost while calculating accounting profits.

b) No change because even earlier it was included as implicit cost in economic cost

Accounting cost = cost of hired factors of prodction i.e. explicit cost

Economic cost = cost of hired factors of production + opportunity cost of self owned factors of producton i.e. explicit cost + implicit cost.