Tag: economics

F.B. Hawley proposed the Risk Bearing Theory of Profit in his 1907 work, Enterprise and the Productive Process. He argued that profit is the reward for the entrepreneur's willingness to bear the risks inherent in business.

John Maynard Keynes introduced the concept of liquidity preference in his book, The General Theory of Employment, Interest and Money, identifying three specific motives: transactions, precautionary, and speculative.

Keynes identified three motives for liquidity preference: the transactions motive, the precautionary motive, and the speculative motive.

In the long run, all costs are variable, meaning there are no fixed costs. Therefore, the average fixed cost curve disappears, and the firm's costs are represented by the long-run average total cost curve.

In the long run, all inputs are variable, allowing firms to adjust their scale of operations, enter or exit the market, and eliminate losses or excess profits to reach a state of normal profit.

Time element was propounded by Alfred Marshall with respect to price discrimination. He said that demand and supply and the price all these factors should be managed by the seller perfectly on time to earn huge profits. Hence, time element was conceived by Alfred Marshall.

If a firm produces beyond the point where Marginal Revenue (MR) equals Marginal Cost (MC), the cost of producing the additional unit (MC) will exceed the revenue gained from it (MR), thereby reducing total profit.