Discussion Question

This discussion focuses on making sure you have a good understanding of accounting cost versus economic profit.  In this course we do not focus on accounting, but gaining good understanding of the broader range of costs that are included in economic profit and not in accounting /financial statements. 

Review examples in Tables 7.1 and 7.2 (Connect text, page 176). Compare and contrast the two situations laid out in the two tables.  They both yield the same decisions on whether Pudge should stay in farming or to stop.   Why is that?  What is captured in the economic profit and loss calculation that is missing in the accounting statements?

Hint: You are encouraged to discuss the reasons for using economic profit/loss in decision making.  Make sure you state what goes into the calculations of the economic statement, prior to digging into the examples presented in Tables 7.1 and 7.2