Profit Flashcards
1
Q
Define normal profit
A
The minimum profit a firm must make to stay in business, which is, however, insufficient to attract new firms into the market
Work out opportunity cost, if opp cost> than the money made, firms will leave the market
2
Q
Define Super Normal Profit
A
> Normal profit
Anything above normal profit
3
Q
What is the role of profit?
A
Creation of business incentives Creation of worker incentives Creation of shareholder incentives Profits and resource allocation Profit and economic efficiency
4
Q
What do high prices signal?
A
High profits
