Question

A smaller profit would be a deterrent for businesses in increasing the minimum wage if the new minimum wage is too costly for the business. If a business's profit is insufficient to support its owners, the business is unsuccessful and will likely go under. If those same business owners could make more money, or a greater profit, on a different business venture or as employees themselves, then they will likely do that instead. In economics, profit is considered total revenue - totals costs, where revenue = price x quantity. Costs are either considered explicit (things like wages, rent, etc.) or implicit (typically in the form of personal resources from the business owner). Accounting profit is just total revenue - total explicit costs, but economic profit is total revenue - both explicit and implicit costs, giving a more accurate picture of total profit. Taking both costs into account is a better determinate of the success of a business rather than just looking at explicit costs. If a business owner uses economic profit to analyze their actual profit, rather than accounting profit, they'll be more likely to accurately depict their longevity, therefore creating a space for shareholders to profit and potentially adding a beneficial good to the market for the long term. if you agree, and why

Answer 1

Statement by statement response:

A smaller profit would be a deterrent for businesses in increasing the minimum wage if the new minimum wage is too costly for the business.

Agree - a higher minimum wage increases the cost of production, and reduces profit margins. Some firms may respond by laying off unskilled and inexperienced workers.

If a business's profit is insufficient to support its owners, the business is unsuccessful and will likely go under.

Disagree - the firm's profit should be able to cover the variable costs in the short run, and the fixed costs in the long run. It takes time to decide whether a business has failed, or to call it unsuccessful.

If those same business owners could make more money, or a greater profit, on a different business venture or as employees themselves, then they will likely do that instead.

Agree - The owner must consider the opportunity cost of any alternative. If the firm continues to make losses, the owner must take the next best alternative.

In economics, profit is considered total revenue - totals costs, where revenue = price x quantity. Costs are either considered explicit (things like wages, rent, etc.) or implicit (typically in the form of personal resources from the business owner).

Agree - economic costs include both explicit and implicit costs

Accounting profit is just total revenue - total explicit costs, but economic profit is total revenue - both explicit and implicit costs, giving a more accurate picture of total profit.

Agree - economic profit will give a better view of the firm's situation.

Taking both costs into account is a better determinate of the success of a business rather than just looking at explicit costs.

Agree - though this value of profit may appear lower, it will give information about the alternatives available to the owner.

If a business owner uses economic profit to analyze their actual profit, rather than accounting profit, they'll be more likely to accurately depict their longevity, therefore creating a space for shareholders to profit and potentially adding a beneficial good to the market for the long term.

Agree - a business that is viable in economic terms will have a longer and sustainable life. Though most shareholders' reports and stock exchanges only ask for accounting numbers, an informed investor must also look at the implicit variables that affect a business.