::Profit (economics)


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In neoclassical microeconomic theory, profit is either of two related but distinct concepts. Economic profit is similar to accounting profit but smaller because it subtracts off the total opportunity costs (not just the explicit costs, but also the implicit costs) of a venture to an investor.<ref>Economic Profit (Or Loss) Definition | Investopedia</ref> Normal profit refers to zero economic profit.<ref name="carbaurgh">Carbaugh, 2006. p.84.</ref> A concept related to economic profit, and sometimes considered synonymous, is that of economic rent.

In classical economics and Marxian economics, profit is the return to an owner of capital goods or natural resources in any productive pursuit involving labor, or a return on bonds and money invested in capital markets.<ref>Adam Smith Profit "In general, the classical economists made no serious attempts to explain the nature and source of profits until the 1820s, when they responded to socialist criticism of profit. Smith apparently accepted without question the legitimacy of profits as a payment to the capitalist for performing a socially useful function, namely, to provide labor with the necessities of life and with materials and machinery with which to work during the time-consuming production process."</ref> By extension, in Marxian economic theory, the maximization of profit corresponds to the accumulation of capital, which is the driving force behind economic activity within the capitalist mode of production.

Other types of profit have been referenced, including social profit (related to externalities). It is not to be confused with profit in finance and accounting, which is equal to revenue minus only explicit costs,<ref name="carbaurgh"/> and superprofit, a concept in Marxian economic theory.

Related concepts include profitability and the profit motive.

Profit (economics) sections
Intro   Normal profit    Other applications of the term   Maximization  See also  Notes  References  External links  

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