INTERMEDIATE

Profit

There are two types of profit: accounting profit and economic profit.

Accounting profit is a firm’s total revenues minus its total costs. It reflects gains made from producing or trading goods and services. A firms profit tends not to exceed the market rate of interest in the long run. 

Economic profit is sometimes referred to as excess profit, economic profit is the gains received when revenue exceeds the opportunity cost of inputs, all monetary costs are covered, and the capital is being employed in the most effective way. Any profit in excess of the market rate of interest is called economic profit.

 

 

Frederic Sautet - The Role of Profit

Paul Cwik - Problems and Prices

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It's been 40 years since F. A. Hayek received his Nobel Prize. His insights, particularly on the distribution of knowledge and the impossibility of economic planning, remain hugely important today. In this issue, we look back on the influence of his work. Max Borders and Craig Biddle debate whether liberty must be defended from one absolute foundation, further reflections on Scottish secession, and how technology is already changing our world for the better--including how robots, despite the unease they cause, will only accelerate this process.
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