Jaynet spends $50,000 per year on painting supplies and storage space. She recently received two job offers from a famous marketing firm – one offer was for $95,000 per year, and the other was for $120,000. However, she turned both jobs down to continue a painting career. If Jaynet sells 35 paintings per year at a price of $6,000 each:________.
a. what are her accounting profits?
b. what are her economic profits?

Accounting profit is simply the bookkeeping profit. It consider monetary revenue that companies earn and only explicit costs. On the other hand, Economic profit not only consider explicit costs but also take in to account the implicit costs, also known as opportunity cost. Opportunity cost simply means that what have you compromised to generate the reported revenue. Usually, the accounting profit will be greater than the economic profit. Investment decisions must always be based on Economic profit. The formulas are:

Accounting Profit = Revenue - Explicit Cost

Economic Profit = Revenue - Explicit Cost - Implicit Cost

⇒ Accounting Profit = (35 * 6,000) - 50,000 = $160,000.

And Economic Profit/(Loss) = (35 * 6,000) - 50,000 - 95,000 - 120,000

= ($55,000)