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What is pure profit? Someone starts a business by opening an account with $30,00...

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yaga49 | (Level 1) Valedictorian

Posted October 5, 2012 at 2:17 PM via web

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What is pure profit? 

Someone starts a business by opening an account with $30,00 August 1, 2011 and January's bank statement had a balance of $75,000.  All pure profit

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted October 5, 2012 at 2:28 PM (Answer #1)

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The term “pure profit” is generally used to mean something very similar to economic profit. 

Economic profit takes into account both explicit cost and implicit cost.  Explicit costs are those that are actually paid out to other people.  Implicit costs are the opportunity costs incurred by the owner of the business.  For example, if that owner quits his or her job to start a new company, the pay they got at the old job would be part of the implicit costs because the owner is foregoing that in order to start the new company.

Pure profit, then, refers to what is left over after all conceivable costs (including implicit costs) are subtracted from gross revenue.

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