Profit Flashcards
1
Q
What is profit
A
Profit expected by the entrepreneur for organising the FoP + taking the risk
If AR=AC the entrepeuneur is happpy
2
Q
Supernormal profit
A
AR > AC
3
Q
Subnormal profit
A
AC>AR
4
Q
Explain the role of profit
A
- Reward for entrepreneurialism
- Creates an incentive for firms to enter/leave if profit isn’t high enough
- Signals firms to enter or leave
5
Q
Profit maximising output
A
My Cat = My Rat
MC = MR
6
Q
Profit satisficing meaning
A
making enough profit to keep shareholders happy
7
Q
Profit satisficing divorce of ownership and control
A
Shareholders
Board of directors
