However, we need to be a little careful in interpreting that. Remember, economists understand cost as opportunity cost -- the value of the opportunity given up. Thus, when we say that businesses maximize profit, it is important to include all costs -- whether they are expressed in money terms or not.
For example, a cab-driver -- the self-employed proprietor of an independent cab service -- says: "I'm making a 'profit,' but I can't take home enough to support my family, so I'm going to have to close down and get a job." The proprietor is ignoring the opportunity cost of her own labor. When those opportunity costs are taken into account, we will find that he is not really making a profit after all.
Let's say that the cab-driver makes $500 a week driving his cab, after all expenses (gasoline, maintenance, etc.) have been taken out. Suppose he can get wages (including tips!) of $800 driving for someone else, with hours no longer and about the same conditions otherwise. Then $800 is the opportunity cost of his labor, and after we deduct the opportunity cost from his $500 net as an independent cabbie, he is actually losing $300 per week.
This is one of the most important reasons for using the opportunity cost concept: it helps us to understand the circumstances that will lead people to get into and out of business.
Because accountants traditionally considered only money costs, the net of money revenue minus money cost is called "accounting profit." (Actually, modern accountants are well aware of opportunity cost and use the concept for special purposes). The economist's concept is sometimes called "economic profit." If there will be some doubt as to which concept of profit we mean, we will sometimes use the terms "economic profit" or "accounting profit" to make it clear which is intended.
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