b) accounting profit would be the profit listed on the income statement, or $177,000. On a pretax basis, that would be $342,000.

c) economic profit would be accounting profit minus implicit costs. That would be: pretax: $342,000 minus $190,000, or $152,000 posttax: $177,000 minus $190,000, but you have to add back in the tax that he would have had to pay if he had kept his job, which is an unknown. If that tax amount is greater than the difference of $13,000 between accounting profit and other implicit costs, then note that his economic profit would be a positive number.

d) as long as the decision is to be evaluated solely on the numbers for the current year, then a positive economic profit means that he made the right decision. A negative economic profit would mean that he made the wrong decision. This number (economic profit) will tell you whether he made enough to cover opportunity costs.

This answer to d) requires additional assumptions. It is based solely on current year numbers. The opportunity (explicit) costs should be reduced by the added satisfaction (utility) that he gets from owning his own business instead of working for somebody else. It should also be adjusted for the difference in the present value of future potential earnings, since that is always a major factor in the start of any business (most businesses expect future earnings to be greater than startup, or first year earnings; wiegh that against whatever raises he would expect if he had kept his previous job).

Your teacher may be expecting you to ignore the additional implicit costs that I list here as assumptions that you have to make, or he may not have considered these himself. It might make things clearer to you if you give him my explanation about changes in income tax between the two choices, the utility of the independence of owning the business instead of working for someone else, and the impact that future earnings should have on this decision. Ask your teacher about these things, and see what he says.