Profit Motive

Driving force that encourages people and organizations to improve their material well-being.

• FOMO

• Market Economy

• Profit Motive

• Voluntary Exchange

A risk-taker in search of profits who does something new with existing resources

• Scarcity

• Competition

• Profit Motive

• Entrepreneur

The incentive to improve material well-being by seeking to gain from economic activities is called

• legal equality

• marginal benefit

• open opportunity

• profit motive

Most people are inspired to start a business by the

• free contract clause

• marginal benefit

• open opportunity clause

• profit motive

Tom was working as a delivery driver for the local pizza store. In 2014, he made approximately $20,000 for the entire year delivering pizza and performing other jobs around the pizza store. In 2015, he decided to quit his pizza job to open his own bike rental store on the local bike trails. In 2015, Tom brought in a total revenue of $50,000 while he had total explicit costs of $30,000. These costs included both fixed and variable costs such as wages for his workers, leasing the building, buying bikes, and buying other resources needed for maintaining the bikes. In 2015 Tom achieved

• an economic profit of $50,000

• an accounting loss of $30,000

• zero accounting profit

• an economic profit of $20,000

• an accounting profit of $20,000

A star athlete receives an offer of $100 million from a major shoe company for a contract to exclusively endorse its products and also receives the same offer from a competing company. If he accepts the contract offer from the first company, an economist would say that based on this information, the contract earns him

• an economic profit of $100 million because he incurred no costs.

• an economic profit of $100 million because his explicit costs are zero.

• a normal profit because his opportunity cost is equal to the payment from the contract he accepts.

• an economic loss because he is unable to accept both contracts.

• an accounting loss because he is unable to accept both contracts.

Once a business has paid all of its costs, the money left over is ___

• revenue

• profit

• supply

• tax

Earning an economic profit of zero is

• a sign that the firm should shut down

• less desirable to a firm than earning an accounting profit of zero

• acceptable during a recession but otherwise not

• equivalent to earning an accounting profit of zero if implicit costs exist

• acceptable because the firm could make no better alternative use of its resources

The money left after production costs are subtracted from revenue is called

• free rider

• profit

• subsidy

• scarcity

In the marketplace, producers are looking to

• buy goods for personal use

• earn a profit

• find incentives

• find the latest fad