Suppose a soccer coach has been making $25,000 per year but gives up his coaching job in order to make soccer shoes. If his revenue from the sale of these shoes is $50,000 and his materials cost $20,000, then his economic profit is equal to .

Economic Profit is equal to $5,000

Explanation:

Accounting Profit is the excess of revenue over cost but the Economic profit is the Net of of Revenue and all costs including the oppportunity cost or explicit costs.

In this question $25,000 is the opportunity cost.

Revenue = $50,000

Material cost = $20,000

Accounting Profit =

Accounting Profit = Revenue - Material cost

Accounting Profit = $50,000 - $20,000

Accounting Profit = $30,000

Economic Profit = Accounting Profit - opportunity cost

Economic Profit = $30,000 - $25,000

Economic Profit = $5,000

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