If a business earns $175,000 in revenue with total costs of $125,000, what must they consider to accurately assess their economic profit?

To accurately assess their economic profit, the business must consider not just their total revenue and costs, but also the opportunity costs involved. Opportunity cost is the value of the best alternative that is given up when making a decision. For example, if the owner of the business could have earned $30,000 working for another company instead of running their own, this amount should be included in the costs. Therefore, the business would need to subtract both the total costs of $125,000 and the opportunity cost of $30,000 from the revenue of $175,000 to find their true economic profit. This means their economic profit would be $20,000, which gives a clearer picture of how well the business is really doing.