Asked by: Abdelkamal Lodochnikov
asked in category: General Last Updated: 2nd May, 2020

What is the meaning of profit in economics?

Economic profit is the excess of total revenue of an enterprise over its total costs, which are the sum of the rent paid for land, wages paid to all employees and the interest paid for capital. This is economic profit, which excludes implicit cost. But accounting profit includes implicit cost.

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Also to know is, what is meant by profit in economics?

Profit has several meanings in economics. At its most basic level, profit is the reward gained by risk taking entrepreneurs when the revenue earned from selling a given amount of output exceeds the total costs of producing that output.

Furthermore, what is an example of economic profit? Economic profit takes into consideration explicit costs and implicit costs, while accounting profit only utilizes explicit costs. For Example: If a company had $250,000 in revenues and $150,000 in explicit costs, its accounting profit would be $100,000. Its economic profit would be $50,000.

Subsequently, one may also ask, what is the best definition of profit?

The best definition of profit is the following: Profit is the financial gain from business activity minus expenses. Profit is the income remaining after total costs are deducted from total revenue. It is the most commonly used measure of success of a business.

What is profit formula?

The profit formula is stated as a percentage, where all expenses are first subtracted from sales, and the result is divided by sales. The formula is: (Sales - Expenses) ÷ Sales. For example, a business generates $500,000 of sales and incurs $492,000 of expenses.

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