ECON LECTURE 14

ECON LECTURE 14 - the owners of the firm including the...

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ECON LECTURE 14: 10/2/08 Economic Profit Is the UNC Ticket Distribution System Efficient? Fair? Educationally Appropriate? Who Bears the Burden of Tax levied in a good or service? Taxing a good generally will change the market price of the good. Who bears the burden depends on how the large price change. The size of the price change depends on the elasticity of demand and supply. When demand is less elastic, buyers tend to bear a larger buden from the tax. When supply is less elastic, suppliers tend to bear a larger burden from the tax. The Economic Definition of Profit is different from the accounting definition Accounting Profit = Total Revenue – Total Explicit Costs Economic Profit = Total Revenue – Total Explicit Costs – Normal Profit What is Normal profit? Normal profit is the opportunity cost of resources supplied by
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Unformatted text preview: the owners of the firm including the opportunity cost of their time Normal profit is the level of profit just sufficient to keep the owners operating the business in question. Profit is a motivator Adam Smith Profit motivates individuals to provide goods and services that members of society would like to consume and use. Profit creates an incentive for entrepreneurs to produce goods and services that society values. In that sense, profit serves an important social function Competition is the Regulator Competition among entrepreneurs tends, over the long run, to reduce profits to normal levels Competition works best in markets where entry by entrepreneurs is free....
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ECON LECTURE 14 - the owners of the firm including the...

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