Question

Module 6 Discussion Assignment 

Explain why land has no economic dollar value (give examples). Also, explain the difference between Normal profit and economic or pure profit.

Answer 1

land has not economic dollar value but it has rented value. Land to society is a free gift of nature. Society has not incurred any cost to obtain the land. As the quantity of land available for use is scarce relative to demand, a price must be paid for its use. This price for the use of land, or what is commonly called land rent, is obtained by those people in the society in whom the ownership of land is vested. it can not be determined in Dollar value as it is not produced by the people in society and people who has land can supply it and earn rent against it. value of land designating in dollar leads that it is available in different country and only have Dollar value. for example different country is vested with different kind of land fertile/ unfertile. every country has it rented value then a dollar value which would be applicable in each country.

Normal profit occurs for a company when the total revenue is equal to total cost which means normal profit is the breakeven point.  economic profit is income minus explicit and implicit cost. Implicit cost includes the opportunity cost and natural resources cost. Economic profit objective leads to understand and assess how well the business is utilizing and allocating the available resources/ Normal profit objectives leads to know whether a firm's revenue is equal to the overall business operational costs or not. The Economic profit is not calculated as per accounting principles but as per economic principles and considers implicit costs also. The Normal profit is assessed by estimating the difference between the cumulative revenue earned and the expenses made.