Questions tagged [profits]

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PED and Stealing

Let's assume the price of bread is high. It's PED is <1 so it's inelastic. As an owner of a bakery and a capitalist, people have started to steal bread from my bakery as it's a necessity. Where is ...
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Does reinvestment of earnings decrease a corporation's tax

There are successful companies that don't make profits, such as twitter, uber, amazon. My question is: Can a company just reinvest lots of money to avoid making a profit and avoid paying tax? From my ...
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Are there any examples of companies prioritizing market dominance or intellectual property ownership over long-term profitability?

I want to know if market dominance (total share of a market's profits) is more important than long-term profitability because psychologists believe that humans and other animals have a social ...
Jude Zambarakji's user avatar
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Finding Quantity when Profit = 0

I'm struggling to find the correct answer which is (B). So far what I've done is say that P=MC as we're in a perfectly competitive market. So profit = PQ - TC which gives 0 = (2Q)Q -(VC+4) ? But we ...
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Capital share of income and profit margins

The capital share of income is defined as gross operating surplus divided by nominal GDP. At the firm level, the profit margin is defined as profits divided by sales. Notwithstanding the fact that ...
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Profit Functions are Homogeneous of Degree 1 in all prices

I'm struggling to understand the intuition behind why the profit function is homogenous of degree one jointly in all prices (i.e. input prices and output prices). the Intuition feels like it should be ...
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Finding the profit from a demand equation

The demand equation for a company's product is $3p + x = 400$, where $x(t)$ units can be sold at a price of $p$ each. If the demand increases at a rate of 3 units per year when the demand reaches 50 ...
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A question on Marx' "Value, price and profit"

In his lecture Value, price and profit Karl Marx argues that profit is made by capitalists by (i) selling commodities for their real price (= real value expressed in money), (ii) paying the workers (...
Hans-Peter Stricker's user avatar
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3 answers
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Causal link between business expansion and profit

I'm working on a conceptual model regarding a restaurant business looking to expand (by adding more restaurants). In that model, there are several variables which lead to lowering costs or increasing ...
Bachir Messaouri's user avatar
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1 answer
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No profits if labour is the only input into production?

I'm studying the Richardian model now - it says that, if labour is the only input into production, there are no profits, so workers receive the full value of their output - i can't wrap my head around ...
viktor nikiforov's user avatar
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If current inflation is (probably) not due to corporate pricing power, then why are profit margins currently so high?

A recent IGM Forum at Chicago Booth survey of economists indicated that few economists think that corporate pricing power is behind current inflation. More specifically, only 7% agreed and 65% ...
Matthew Barnett's user avatar
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Bid-rent function in The Microgeography of Housing Supply

I came across the paper "The Microgeography of Housing Supply" (Baum-Snow, 2020)(https://luhan2.weebly.com/uploads/9/6/0/8/96080580/housing_supply_julyb2020.pdf) and I must admit that I do ...
housing_guy_8192's user avatar
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In the real world, do companies try to maximize return via maximizing profits or maximizing profits/costs (or neither)?

Suppose I buy $s$ shares of a stock at price $p_0$ and then later sell at price $p_t$. The initial and final values of my investment are then $I_0=sp_0$ and $I_t=sp_t$ respectively. The return is then ...
Stan Shunpike's user avatar
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Perfect Competition, Zero profit rule and General Equilibrium

I'm reading a book where the definition of an equilibrium for a competitive economy is given as in Kenneth J. Arrow; Gerard Debreu (1954) Existence of an Equilibrium for a Competitive Economy ...
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ECONOMIC VS ACCOUNTIGN PROFIT

Been trying to calculate economic vs accounting profit as per below but I don't seem to get the correct answer. Any help will be appreciated. John Smith previously earned £ 10,000 a year in employment ...
Crash Bandicoot's user avatar
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Profit share determination in PKE

To my understanding, post-keynesian economics generally see price as a product of profits, wage expenses, interest payments, and inventory costs. To express it mathematically: \begin{gather*} p\ =\ \...
Alexandre Michaud's user avatar
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Is Google Street View profitable?

For many years, Google offers this amazing service called Street View, where they show us full panorama photos taken by special cars that drive on a number of roads, even the most remote ones. It's ...
just_curious's user avatar
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Percentage increase of the price of a good if there is a pay raise

I have a question about the percentage increase of the price of a good if there is a pay raise given to the firm's workers. I am reading economics for my own personal interest so I apologise if there ...
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Is there a formal definition of opportunity costs, economic costs, and/or economic profits?

[Edited to remove a mistake in a definition and some typos.] According to various econ textbooks (e.g. this one), there is a fundamental distinction between economic profit and accounting profit: (i) ...
VARulle's user avatar
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Accounting profit in macroeconomics as compared to microeconomics

In Macroeconomics (2019) on p.103, it is argued that the reason there exists profit in an economy is that most firms own rather than rent capital. Thus: But, Microeconomics assumes a different ...
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Why does a firm make profit in a perfect competition market

I'm solving a problem about $n=180$ firms in a perfect competition market, where demand is given by $D(p)=100-5p$. A firm's cost function is $c(q_i) = 2 \cdot (q_i)^2$. Using $p = c'(q_i)$ and the ...
Friedrich's user avatar
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What's the logic behind dividing rental price of capital and wage rate by price level?

I've just started to learn macroeconomics and I think even the teachers can't get what's the price level and why we divide by it in order to find for example real economic profits. Textbook says "...
Ali Rahimli's user avatar
1 vote
3 answers
187 views

Why don't governments ban businesses from passing tax costs onto their customers?

So, after a bit of discussion in the comments of this question on the Politics SE, I figured I'd post it here: One of the arguments against taxing large businesses is that they'll just pass the costs ...
nick012000's user avatar
9 votes
10 answers
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Why don't profitable firms use previous profits to offset current loss

It is being reported that EasyJet expects a heavy loss in the current year due to Covid-19 pandemic. The report states that The airline said it expected to sink into a pre-tax loss of between £815m ...
RedBaron's user avatar
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What are the pros and cons of a "long stock, short call" position compared to a "short put"?

The profit-loss diagram for the "long stock, short call" position and the "short put" position are almost exactly the same, except that for the former, you may be able to profit ...
Tan Yong Boon's user avatar
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1 answer
198 views

What does Smith mean by "price of work" in this context?

I've read these excerpts from The Wealth of Nations multiple times: In reality high profits tend much more to raise the price of work than high wages In raising the price of commodities the rise of ...
Paul Razvan Berg's user avatar
4 votes
2 answers
81 views

Why do different product-markets record different rates of return if the assumption of competitive markets hold?

I'm a new economics student, and have become fascinated by the field of Industrial Organization. To that end, I'm reading through the Carlton and Perloff Modern Industrial Organization text book. In ...
new_but_trying_to_learn's user avatar
4 votes
1 answer
50 views

Average ability conditioning on having accepted an offer

There is a continuum of workers between 0 and 1. These have ability $\alpha\sim U[0,2]$. A firm offers them a salary $v$ and has profits $$ \pi = (\rho \alpha-v) n(v) $$ where $n(v)$ is the fraction ...
Three Diag's user avatar
5 votes
1 answer
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Has it truly been established that the restaurant industry operates on thin margins?

For as long as I can remember I've constantly seen the truism that restaurants operate on "razor sharp margins" repeated endlessly by the media, the restaurant industry, and the average joe. This ...
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break even time

How can we know a company's break even time? I know how to calculate the break even point. I am also assuming that the lower your break even point, the less time it may take you to reach it. ...
maths New's user avatar
4 votes
3 answers
195 views

How much average value does 1 working hour produce? ( are there reliable statistics?)

This is a non-economist's question. As a philosophy teacher ( in a french high school) , I have to study the theme of " labour" in class. I'm looking for factual data in order to assess the ...
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How to prove that profit function is convex in price (with smaller price)?

According to this site, if output price increases from $p*$ to $p'$ and factor prices remain constant, then a new production bundle chosen must yield at least the same amount of profits as the old ...
Aqqqq's user avatar
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2 votes
3 answers
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Opportunity profits vs. opportunity costs

Having learned that Opportunity costs = the costs for avoided profits are a well established and quite useful economic concept, I wonder how its counterpart is officially called and investigated: ...
Hans-Peter Stricker's user avatar
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0 answers
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What happens to net assets in case of increasing NPAs(Non-Performing assets)?

The bank's profit is measured as Return on Assets which is the ratio of Bank’s net profits and Net assets. In case of increasing NPAs, the bank's net profits will decrease, but what will happen to ...
Harika's user avatar
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1 vote
1 answer
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Are sales (discounts) an investment or a loss?

Are sales (discounts) during a promotional period considered an investment by the company/manufacturer to drag in more customers? Or a loss that wouldn't be paid back anytime in the future, but also ...
ZenLife18's user avatar
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0 answers
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What is Adjusted Nett Gross?

Can anybody explain to me Nett Gross, Adjusted Nett Gross and Total Nett Gross through an example? I am new to this subject and from an engineering background. This knowledge is required for my ...
PS Nayak's user avatar
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3 answers
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Why are there not more competitive nonprofits?

For example, when I go to the grocery, and peruse the various goods for sale on the shelves, there is at least a 99.9% chance that any given product is produced for-profit. Even "Newman's Own", which ...
Him's user avatar
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3 votes
1 answer
628 views

If every company in the economy earns zero economic profit, can they contribute to real economic growth?

I understand that zero economic profit does not equal to zero accounting profit. It means that every resource that goes into the production is perfectly utilized considering alternative uses in the ...
refik's user avatar
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1 answer
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please help describe a) what exactly is the Paradox of Profits , b) what is the argument of these papers exactly

here are 3 papers that discuss it. it seems to me that the paradox is that, supposing a closed economy has money M raised through bank loans, then, while that economy can create goods and services and ...
Randor's user avatar
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1 answer
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Why'd a company issue unpaid shares, to acquire or merge companies?

Under the heading Why would a company issue unpaid shares? by Johnathan Korchak Although unpaid and partly paid shares are far less common than fully paid shares, there are a number of reasons why a ...
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1 answer
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How has my profit margin risen?

I quote the first few paras. of this Reddit comment: [1.] Imagine you had a business selling lollipops at school. Since you can buy a bag of 100 for \$10, you can sell them for 25¢ a piece for a ...
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1 answer
783 views

Can implicit costs be negative?

I think that conventionally implicit costs are positive but if for example we consider a negative interest rate as an implicit cost, the implicit cost would be negative. Is this true? Can implicit ...
pdid's user avatar
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In perfect competition, why is there economic loss if marginal cost > marginal revenue?

Here's a graph for reference: In the left graph, I read from a book (CFA L1 notes) that At any output above the quantity where $MR = MC$, the firm will be generating losses on its marginal ...
Shirish Kulhari's user avatar
3 votes
1 answer
102 views

The relationship between gross profit and tax

I tried to do following question but I am not sure about my solution. Please tell me your opinions Since gross profit is strictly concave, I can say that $R’’(y)-C’’(y) <0$ Now I maximize the net ...
b11bb's user avatar
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1 answer
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What famous company that turned a loss at its first year(s) but then became profitable? [closed]

In a discussion with a friend, he mentioned that a new company may fail to gain profits for several years before it becomes profitable. I asked him for examples but he did not know any. I though of ...
NoChance's user avatar
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1 answer
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Why is investment not a cost in firms profit functions?

In all textbooks I've seen profits is written as: $$\pi=py-wL-rK$$ It is evident here that w and r are operational costs. But unless there is no depreciation and the level of capital is to remain ...
SolowInLaw's user avatar
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1 answer
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When big companies invest on a new idea/product?

I am graduated in AI field. I love robotics and intelligent systems, so I worked on some new products by myself at home that have new ideas and are interesting(at least me and my friends think!). I ...
user3486308's user avatar
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1 answer
906 views

Why wasn't the wage of the entrepreneur included in explicit costs?

I was solving an economic problem (I was calculating explicit and implicit costs) and noticed one interesting thing: In the said problem, the entrepreneur set himself the wage of 10 000 rubles AND in ...
KarmaPeasant's user avatar
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Capital mobility across industries and equalization of profit rates

What are some restrictions to the competitive restoration of proportionality across industries in regards to capital mobility? What is generally impeding the free flow of capital from less profitable ...
david's user avatar
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1 vote
2 answers
240 views

Marginal productivity, wages, and profits in neoclassical economics

In neoclassical economics a worker is paid the marginal product of what they produce. If this is true then what is the source of profits?
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