Economic Profit
An Economic Profit is economic metric from a production process that subtracts economic expenses from economic revenue.
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- Example(s):
- Counter-Example(s):
- See: Money, Cost-Benefit Analysis, Cost-Benefit Matrix, High-Utility Itemset, Implicit Cost, Explicit Cost, Natural Resources, Profit Motive, Accounting Profit, Opportunity Cost, Economic Rent, Property.
References
2015
- (Wikipedia, 2015) ⇒ http://en.wikipedia.org/wiki/profit_(economics) Retrieved:2015-2-21.
- In neoclassical microeconomic theory, profit is either of two related but distinct concepts. Economic profit is similar to accounting profit but smaller because it subtracts off the total opportunity costs (not just the explicit costs, but also the implicit costs) of a venture to an investor. [1] Normal profit refers to zero economic profit.[2] A concept related to economic profit, and sometimes considered synonymous, is that of economic rent. In classical economics and Marxian economics, profit is the return to an owner of capital goods or natural resources in any productive pursuit involving labor, or a return on bonds and money invested in capital markets. [3] By extension, in Marxian economic theory, the maximization of profit corresponds to the accumulation of capital, which is the driving force behind economic activity within the capitalist mode of production.
Other types of profit have been referenced, including social profit (related to externalities). It is not to be confused with profit in finance and accounting, which is equal to revenue minus only explicit costs, and superprofit, a concept in Marxian economic theory.
Related concepts include profitability and the profit motive.
- In neoclassical microeconomic theory, profit is either of two related but distinct concepts. Economic profit is similar to accounting profit but smaller because it subtracts off the total opportunity costs (not just the explicit costs, but also the implicit costs) of a venture to an investor. [1] Normal profit refers to zero economic profit.[2] A concept related to economic profit, and sometimes considered synonymous, is that of economic rent. In classical economics and Marxian economics, profit is the return to an owner of capital goods or natural resources in any productive pursuit involving labor, or a return on bonds and money invested in capital markets. [3] By extension, in Marxian economic theory, the maximization of profit corresponds to the accumulation of capital, which is the driving force behind economic activity within the capitalist mode of production.
- ↑ Economic Profit (Or Loss) Definition | Investopedia
- ↑ Carbaugh, 2006. p.84.
- ↑ Adam Smith Profit "In general, the classical economists made no serious attempts to explain the nature and source of profits until the 1820s, when they responded to socialist criticism of profit. Smith apparently accepted without question the legitimacy of profits as a payment to the capitalist for performing a socially useful function, namely, to provide labor with the necessities of life and with materials and machinery with which to work during the time-consuming production process."
2014
- http://www.investopedia.com/terms/p/profit.asp
- A financial benefit that is realized when the amount of revenue gained from a business activity exceeds the expenses, costs and taxes needed to sustain the activity. Any profit that is gained goes to the business's owners, who may or may not decide to spend it on the business. Calculated as: Economic Profit = Total Revenue - Total Expenses.
Profit is the money a business makes after accounting for all the expenses. Regardless of whether the business is a couple of kids running a lemonade stand or a publicly traded multinational company, consistently earning profit is every company's goal. The path toward profitability can be long. For example, online bookseller Amazon.com was founded in 1994 and did not produce its first annual profit until 2003. Many start ups and new businesses fail when the owners run out of capital to sustain the business.
- A financial benefit that is realized when the amount of revenue gained from a business activity exceeds the expenses, costs and taxes needed to sustain the activity. Any profit that is gained goes to the business's owners, who may or may not decide to spend it on the business. Calculated as: Economic Profit = Total Revenue - Total Expenses.