How popular notion of business profit is is different from t

How popular notion of business profit is is different from the economic profit concept? What role does the idea of normal profit play in this difference?

\"In the long run, profit maximizing firm will never knowingly market unsafe products. However, in the short run, unsafe products can do a lot of damage.” Discuss the statement.

Solution

1. Normal profit occurs when your revenue equals your economic costs. Economic profit is when your revenues are more than your economic costs. What your probably wondering is why normal profit would be considered a profit at all if the costs EQUAL the revenue. It seems like your only breaking even. But economists consider it a normal profit because that\'s what a business should normally expect to make in the long-run.

2.The marketing of unsafe products is clearly inconsistent with long-run profit maximization. For example, no pharmaceutical manufacturer would knowingly market drugs with negative side-effects much greater than intended benefits. Unfortunately, undercapitalized or \"hit and run\" manufacturers can inflict a lot of damage in the short run before the negative side-effects of drugs and other products are fully realized. When the quantity and quality of consumer information is limited, mistakes can and do occur. From this perspective, government or industry regulation of product safety has the potential to reduce the social costs that result from unsafe products.