T4 - Profit Flashcards
What do economist argue firms single objective is
Profit
What is normal profit
Min level of profit to operate in a market
What are incumbent firms
Firms already in the market
What does it mean if profits are low o
New firms wont want to enter markets
What are super normal profits
Profits above normal profits
When do supernormal profits occur
When there are limited firms in a market with many barriers to entry
What is the role of profit
To attract new firms into a market
Other roles of profit
Creation of worker incetnives
Shareholder incentives
Resource allocation
Innoavtion and risk raking
Business finance
When price is constant what is equal to what
MR = AR
When should fors produce up to
MC = MR
Why should firms produce upto MC = MR
As there is still room to make profit on each sale
When is there normal profit on a graph
ATC = AR
