Is one of these concepts better than the other? No. Firms are interested in
the financial return to their owners, which is what they call profits. They
must also conform with tax laws, which define profits in the same way. In
contrast, economists are interested in how profits affect resource
allocation; their definition is best for that purpose and is the definition
used throughout this book. Let’s see why economic profit is a useful
concept when thinking about resource allocation.
