Fair market value (FMV) is equal to whatever the customer is willing and able to pay for it. Think of the equilibrium point on a Supply and Demand chart. That will give you a rough estimate of the FMV. Milton Friedman created a formula to calculate this, but it is beyond my mathematical capabilities. Inputs (e.g. equipment, ink) has no bearing on FMV.

Book value (BV) is the cost of a product. This is what your accountant will value it as. BV will be the sum of the inputs including raw materials, a pro rata portion of the value of the equipment used (you’re not going to create 1 piece of art on Photoshop, so you can’t consider the whole cost of the software into that 1 artwork), the artist’s labor, and a proportionate amount of overhead costs (e.g. studio rent, electricity, marketing efforts). This is the absolute minimum a supplier (i.e. artist) will sell a piece for, and represents the break even value of producing the art. This does not include profit, because profit is the difference between BV and FMV.

Opportunity cost is the next best alternative. If the art studio could not sell art, what would it be selling? Opportunity cost less the BV is considered the normal profit for that industry/company/widget. This is not what your competitors earn, it is what else YOU could earn if you could not being doing this. Generally opportunity cost is less than or equal to that next best option.

Hope you enjoyed my economics lesson.