P. 24. Enterprise and profit., p.333.

Entrepreneur makes the decisions of how and when to produce by taking a risk in anticipating the demand. Some argue it's a special form of labour. Profit might actually be negative. They

buy or hire labour, capital etc. necessary for business,

combine the resources at a cost-minimising way,

sell products in the most advantageous way (profit maximising assumption).

Profit acts as an incentive to firms, as a measure of efficiency and as a spur (stimulus) to the inventions of new products.

Entrepreneur must achieve the best factor mix that is characteristic to particular economy (capital intensive farming in UK, land intensive in Canada).

Profit is:

1. The money left over after all expenses have been paid for accountant. Much are implicit costs of other factors. Many figures are estimated. Profit either before or after tax. Depreciation and inflation must be accounted.

[II] Net profit - profit after all costs + interest and depreciation.

[III] Gross profit - net profit before depreciation and interest.

2. Economist view is the money left over after opportunity cost (abnormal profit). Normal profit is the amount sufficient to keep the firm in industry. Does not include return on capital, land etc.

Innovation will lead to big short - term profits.

Profit is the reward for risk successfully taken:

Speculative risk - game on changing prices

Economic risk - supply on anticipation of demand

P. 24. Enterprise and profit., p.333.

Entrepreneur must achieve the best factor mix that is characteristic to particular economy (capital intensive farming in UK, land intensive in Canada).

Profit is:

1. The money left over after all expenses have been paid for accountant. Much are implicit costs of other factors. Many figures are estimated. Profit either before or after tax. Depreciation and inflation must be accounted.

[II] Net profit - profit after all costs + interest and depreciation.

[III] Gross profit - net profit before depreciation and interest.

2. Economist view is the money left over after opportunity cost (abnormal profit). Normal profit is the amount sufficient to keep the firm in industry. Does not include return on capital, land etc.

Monopoly profits - reaping a reward without taking risk (also for unions). Factors that are earning economic rent can be said to earn MP as well.

Government controls profits (17% of GDP only) because:

a. Equity.

b. Monopoly profit (2% of GDP).

1. Price controls - as part of an incomes policy or dealing with monopoly profits.

2. Taxation - fiscal weapons, corporation tax.

Consequences: Forcing firm to a loss

Taking away incentive

Product will become uncompetitive abroad

Double-bluff of capitalism - ploughed backed profits (not taxed) will make more in future and improve the dividend cover.