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Actually economic profit is an indicator of market inefficiency. Demand is what tells you that you’re selling something of value. Extended profits mean competit
by mcmcmc 2y ago
Actually economic profit is an indicator of market inefficiency. Demand is what tells you that you’re selling something of value. Extended profits mean competition hasn’t caught up yet. It has nothing to do with good or bad. If there is profit to be made in a market, firms will enter until it reaches an equilibrium where profit is 0, then when it becomes overcrowded and firms are losing money, they leave the market. This is why anticompetitive business practices are so successful at generating profits, and at the same time are so horribly bad for the free market. In an efficient market, profits converge towards zero.
- fsckboy 2y ago"economic profit" is a different concept. non-profits, the topic of this discussion, are defined as not allowed to make "accounting profit"