A new coffee shop opens in a competitive neighborhood where several similar establishments already exist. Initially, the owner believes that by offering lower prices, they can attract customers and achieve economic profits. However, after a few months, they notice that their total revenue is not covering their total costs, including the opportunity cost of their time and investment. What principle from economic theory explains why the coffee shop may not be realizing economic profits despite initially attracting customers?

The coffee shop's situation can be explained by the principle of economic profits, which considers not just the money made from sales but also the costs of resources used, including time and investment. Initially, offering lower prices may attract customers, but if the total revenue from those sales does not exceed all costs, including what the owner could have earned elsewhere, then they are not making economic profits. This is because in a competitive market, many businesses can easily match lower prices, leading to a price war that can squeeze profits for everyone. For example, if the coffee shop sells coffee for $2, but the total cost of making and selling that coffee is $2. 50, they are losing money even if they have many customers.