INTERMEDIATE

Profit

FEBRUARY 24, 2013

There are two types of profit: accounting profit and economic profit.

Accounting profit is a firm’s total revenues minus its total costs. It reflects gains made from producing or trading goods and services. A firms profit tends not to exceed the market rate of interest in the long run. 

Economic profit is sometimes referred to as excess profit, economic profit is the gains received when revenue exceeds the opportunity cost of inputs, all monetary costs are covered, and the capital is being employed in the most effective way. Any profit in excess of the market rate of interest is called economic profit.

 

 

Frederic Sautet - The Role of Profit

Paul Cwik - Problems and Prices

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