00:01
So here we're going to do some economic accounting and let's first think about all the things we know.
00:05
We opened a business and that business is making $500 ,000.
00:11
We also had we had to hire two engineers and those two engineers we paid them $150 ,000 each, $150 ,000 times two.
00:23
So we paid our engineers 300 ,000.
00:26
We also equipment.
00:28
We bought equipment that was 30 ,000.
00:35
We also used basement, right? we normally would have rented this out, but we didn't rent it out.
00:47
And so we gave up $6 ,000 of rent.
00:50
We could have rented this out, but we didn't rent it out.
00:53
And so consequently, we had $6 ,000 of less of rent.
00:58
We also could have had a salary if we had just gone and worked for microsoft.
01:04
And so our salary was foregone, right? we didn't pay this, but we went sort of out of, we could have had that salary if we had just went to microsoft.
01:18
So accounting profit doesn't capture any opportunity costs, right? this is simply my accounting profit.
01:30
Accounting profit is money in minus money out...