(Transcript of audio with descriptions. Transcript includes narrator headings and description headings of the visual content)
(Speaker)
For this problem you're going to be asked to calculate both accounting and economic profit and apply the concepts to a decision about career choices.
(Description)
The following text is briefly written:
Hiro owns and operates a small business that provides economic consulting services. During the year he spends 57 thousand dollars on travel to clients and other expenses. In addition, he owns a computer that he uses for business. If he didn’t use the computer, he could sell it and earn yearly interest of 100 dollars on the money created through this sale. Hiro’s total revenue for the year is 100 thousand dollars. Instead of working as a consultant for the year, he could teach economics at a small local college and make a salary of 50 thousand dollars.
a. What is Hiro's accounting profit?
(Speaker)
We will start by calculating the accounting profit for Hiro, who faces the decision of providing economic consulting services or working as an economics instructor.
In order to calculate accounting profit for Hiro's consulting business, subtract total revenue from explicit costs.
(Description)
The following text is briefly written below the previous one:
Accounting profit is equal to total revenue minus explicit cost.
(Speaker)
For this particular problem, Hiro's total revenue from his consulting services equals 100 thousand dollars. And his explicit costs are 57 thousand dollars in travel to clients and other expenses.
(Description)
The following text is briefly written below the previous one:
In this problem Hiro's total revenue is 100 thousand dollars and his explicit costs are 57 thousand dollars.
(Speaker)
To find Hiro's accounting profit subtract 100 thousand dollars and 57 thousand dollars for a profit of 43 thousand dollars.
(Description)
The following text is written below the previous one:
His accounting profit is 43 thousand dollars (100 thousand dollars minus 57 thousand dollars).