Question

What is profit? There is accounting profit discussed in the textbook: profit = total revenues – explicit costs Let me relate profit to the factors of production. The three factors of production according to the textbook are land, labor, and capital. Let me add a fourth factor found in many economics textbooks: a return to the entrepreneur! (Entrepreneurs provide two services to society: organize resources and assume risk.) So how does a firm or entrepreneur maximize its profits? The answer is simple: provide society what it wants. (Note: this may be different from what society needs.) Note: Given this perspective, profit is something inherently good, something to be maximized, not feared. Let’s refine our understanding of this concept. Normal profit is that return necessary to attract and maintain entrepreneurial participation in some economic activity. Economic rent is return greater than normal profit.

Response:

Answer 1

Profitability is important from the perspective of capitalism, as it does not derive capital from the capital invested, leading to a situation without profit. Capitalism leads to capital formation and assists in enhancing economic activities such as production, production is carried out by various factors of production that contribute to the production of different goods and services. Tenants, renters, labor, land capital, and product entrepreneurs, these factors earn wages, interests, rents and profits.

Profit / Profit Accounting. = Total revenue - explicit cost

The accounting profit shows the total profit - the explicit cost and the economic profit shows the accounting profit - the indirect cost

An entrepreneur needs to take a risk and make a profit so that the entrepreneur can become a capitalist, taking over the services of his production and pay factors and earning his profit for demonstrating his skills and ability to take risks and generate profits. Entrepreneurs are responsible for the risks of producing goods and services, such as public needs, and are responsible for ensuring the law and quality of prices. This is the kind of risk that entrepreneurs have to bear to pay for.
Entrepreneurs make a profit that can be high profit and normal. Entrepreneurs want to maximize profits for the production of goods and services and fulfill many of the same responsibilities, but not always profitably.