How does the profit motive affect the goals of producers?

Profit motive refers to the concept that the driving force behind the actions and efforts of business enterprises is the desire to earn a profit. … The business owner maintains a laser focus on this objective, which affects all the decisions a business — a producer of goods and services — makes.

What is produced with a profit motive?

The profit motive is the intent to achieve a monetary gain in a project, transaction, or material endeavor. … Simply put, the profit motive suggests that people tend to take actions that will result in them making money (profiting).

Which of the following best explain what the profit motive pushes producers to do?

Which of the following best explains what the profit motive pushes producers to do? Minimize costs and maximize revenue.

How does profit motive affect innovation and economic productivity?

Profit motive promotes efficiency and productivity in an economy. … Profit motive does not only provide a necessary ingredient in wealth creation, but it is also the engine that drives research, along with development, leading to new innovation and, consequently, increase in productivity.

Why does profit motive lead to efficiency and innovation?

Without competition, people wouldn’t have a lot of choices. … Individuals need to own resources in order to make free choices. Which best explains why the profit motive often leads to efficiency and innovation? The competition to make profit drives producers to eliminate waste.

Which is the main force behind the decisions made by producers in a free-market society?

Self-interest is the motivating force behind the free-market. People produce goods and services for their own personal gain.

Which of the following is the main force behind the decisions made by producers in a free-market?

In a market economy, the producer gets to decide what to produce, how much to produce, what to charge customers for those goods, and what to pay employees. These decisions in a free-market economy are influenced by the pressures of competition, supply, and demand.

Which of the following best states the purpose of using a production possibilities frontier?

Which best states the purpose of using a production possibilities frontier? Setting up efficient production.

Which describes a situation where competition between producers exists?

Which describes a situation where competition between producers exists? Two or more producers are trying to sell the same good or service to the same consumers. Which type of market structure is most closely associated with the automobile industry? Oligopoly.

What explains how revenue is determined?

The sales revenue formula calculates revenue by multiplying the number of units sold by the average unit price. Service-based businesses calculate the formula slightly differently: by multiplying the number of customers by the average service price. Revenue = Number of Units Sold x Average Price.

Which statement best explains the purpose of advertising?

Which statement best explains the purpose of advertising? Advertising is about buying the attention of an audience of potential consumers.

Which best describes a situation of monopolistic competition?

Which describes a situation where monopolistic competition exists? Many producers are selling slightly differentiated products. … The total amount of money brought in by sales is calculated.

Which of the following best describes a situation where an oligopoly exists?

Which best describes a situation where an oligopoly exists? A small number of producers command nearly the entire market for a certain good or service.

Which statement best explains how using a production possibilities frontier PPF helps set up efficient production?

Which statement best explains how using a production possibilities frontier (PPF) helps set up efficient production? A PPF shows the maximum amount of goods that can be produced with a given set of inputs.

What products do industries produce in a monopolistic competition?

Examples of industries in monopolistic competition include the following:
  • Clothing and apparel.
  • Sportswear products.
  • Restaurants.
  • Hairdressers.
  • PC manufacturers.
  • Television services.

Why a firm in monopolistic competition will make normal profit in the long run?

The monopolistically competitive firm’s long‐run equilibrium situation is illustrated in Figure . … Thus, in the long‐run, the competition brought about by the entry of new firms will cause each firm in a monopolistically competitive market to earn normal profits, just like a perfectly competitive firm. Excess capacity.

When firms in monopolistic competition are making an economic profit firms will?

If the firms in a monopolistically competitive industry are earning economic profits, the industry will attract entry until profits are driven down to zero in the long run.

How can monopolistic competition maximize profit?

In a monopolistically competitive market, the rule for maximizing profit is to set MR = MC—and price is higher than marginal revenue, not equal to it because the demand curve is downward sloping.

What are the benefits of monopolistic competition?

The advantages of monopolistic competition include:
  • a few barriers to entry;
  • active business environment;
  • customers can obtain a great variety of products and services since they are differentiated;
  • consumers are informed about goods and services available in the market;
  • higher quality of products;

What is the role of product differentiation in monopolistic competition?

Firms use the differentiation to tell buyers why their product’s quality and price combination is better than their competitors. … In Monopolistic Competition, a firm is not a price-taker and its demand curve has an inverse relationship with the price of the product.

Why is profit so high in a monopolistic firm?

Monopolistically competitive firms maximize their profit when they produce at a level where its marginal costs equals its marginal revenues. Because the individual firm’s demand curve is downward sloping, reflecting market power, the price these firms will charge will exceed their marginal costs.

What does monopolistic competition mean in economics?

Monopolistic competition characterizes an industry in which many firms offer products or services that are similar (but not perfect) substitutes. Barriers to entry and exit in a monopolistic competitive industry are low, and the decisions of any one firm do not directly affect those of its competitors.

How does perfect competition determine profitability?

Determining the highest profit by comparing total revenue and total cost. A perfectly competitive firm can sell as large a quantity as it wishes, as long as it accepts the prevailing market price. If a firm increases the number of units sold at a given price, then total revenue will increase.

What type of profit does a monopoly make in the long run?

zero
Key characteristics. Monopolies can maintain super-normal profits in the long run. As with all firms, profits are maximised when MC = MR. In general, the level of profit depends upon the degree of competition in the market, which for a pure monopoly is zero.