Profit work for test Flashcards
What is profit?
the difference between total sales revenue and total cost of production
What is profit maximisation?
occurs at the level of output at which total profit is greatest
What is total profit?
total revenue - total costs
What is a negative profit?
a loss
What is a normal profit?
the minimum profit a firm must make to stay in business, which is, however, insufficient to attract new firms into the market
What is supernormal profit?
profit over and above normal profit
(extra profit)
What is supernormal profit also known as?
abnormal profit
What is the role of profit in a market economy?
- the creation of worker incentives
- creation of shareholder incentives
- profits and resource allocation
- profit as a reward for risk taking
- profit as a source of business finance
What is an application for this?
the John Lewis application
What type of business is John Lewis?
a PLC (public limited company)
How does John Lewis share its profits?
shares profits with the workers, making them part owner
Does John Lewis have external shareholders?
no - it offers the workers indirect ownership of the company
What are the perks of being a worker at John Lewis?
get voting rights on the board and get some profits each year
in terms of revenue and costs, what happens when a firm breaks even?
TR = TC
