Why does an entrepreneur deserve to be compensated with profit?

What will be an ideal response?


Profit is a payment for entrepreneurial ability, which involves combining and directing the use of economic resources in an uncertain and innovative world. Economic profits are a reward to the entrepreneur for assuming risks in an uncertain and changing economy. Profit is not a payment for assuming all risk, but simply uninstallable risk due to changes in the market or the economy. Risk that can be insured, such as for weather damage or fire, becomes a cost of production in the form of a payment for insurance. Profit is compensation for the entrepreneur who assumes the uninstallable risk for the firm and benefits when the firm makes profits and must cover the costs when the firm experiences losses.

Economics

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Which of the following situations lead firms to increase production?

A) real GDP = $16.0 trillion and aggregate planned expenditures = $15.0 trillion B) real GDP = $15.0 trillion and aggregate planned expenditures = $14.0 trillion C) real GDP = $12.0 trillion and aggregate planned expenditures = $12.0 trillion D) real GDP = $15.0 trillion and aggregate planned expenditures = $16.0 trillion E) Both answers A and C are correct.

Economics

Beginning from a long run equilibrium in a competitive industry, if there is a substantial, permanent increase in demand for industry output:

a. firms will enter the industry, the quantity produced will rise, and prices will end up lower than their initial long run equilibrium level. b. firms will enter the industry, the quantity produced will rise, and prices will end up higher than their initial long run equilibrium level. c. firms will enter the industry, the quantity produced will rise, and prices will end up at the same level as their initial long run equilibrium level. d. firms will enter the industry, the quantity produced will rise, and but without more information, we cannot know if prices will end up higher than their initial long run equilibrium level.

Economics

The share of the net national debt owned by foreign individuals, businesses, and governments has steadily risen to 80%

a. True b. False Indicate whether the statement is true or false

Economics

Which of the following statements is correct?

a. The CPI can be used to compare dollar figures from different points in time. b. The percentage change in the CPI is a measure of the inflation rate, but the percentage change in the GDP deflator is not a measure of the inflation rate. c. Compared to the consumer price index (CPI), the GDP deflator is the more common gauge of inflation. d. The GDP deflator better reflects the goods and services bought by consumers than does the CPI.

Economics