In this article we will discuss when does the profit of a firm become maximum. Also learn about why is the equality of marginal revenue and marginal cost essential for profit maximisation in all types of markets. The basic objective of a firm under all types of market situation is the profit maximisation. Accordingly, a firm, whether competitive or monopolistic, [...]
In this article we will discuss about Taussig’s theory of profit. Also learn about its criticisms. According to rent theory supernormal profit is a surplus above the opportunity (transfer) cost of entrepreneurship. Therefore, it is comparable to economic rent which is also a surplus. According to the wage theory of profit, advanced by Taussig, profit is a type of wage. [...]
In this article we will discuss about the innovation theory of profit. Although profits arise due to frictions (i.e., time lags in market adjustments) and monopoly positions, the innovation theory, advanced by Schumpeter, goes one step ahead to suggest that profit is the reward for innovation. Profit is a necessary reward for inducing individuals to undertake the risks associated with [...]