Readers Question: What factors determine the wage that someone receives? Basic economic theory suggests that wages depend on a worker’s marginal revenue product MRP. (this is basically the value that they add to the firm which employs them.) MRP is determined by two factors: MPP – Marginal physical product – the productivity of a worker. …
Level of Company Gross Profit in the UK Profitability of companies – ONS In 2016, Gross profit by UK non-financial companies was £2,993,446 million or £2,993 bn Cash reserves of companies have increased. In 2014, the Bank of England estimated cash reserves of UK firms at £284 billion See: Cash reserves PNFC – Private non-financial companies. …
Readers Question: Can you please explain how speculators can gain a profit from a speculative attack on currencies? A speculative attack on a currency occurs when ‘investors’ believe that the value of a currency is over-valued and therefore, they sell that currency in anticipation of it falling and buy another currency (e.g. sell their holdings …
Profit maximisation is an assumption of classical economics. One can easily understand the logic of pursuing profit maximisation. Profits enable greater wages and dividends for the entrepreneurs who set up the company. Profit can be used to finance investment in expanding the company Profit provides a fall back for difficult times However, despite the benefits …
How to work out output, price and profit from monopoly equations. Readers Question: A monopolist operates under a production technology which allows the production of any output level at a constant average cost of $5 per unit. This monopolist sells into two distinct markets the demand curves for which are: P1=55-Q1 (for market one) and …
Readers Question: Is it better to sell more services/products with less profit, than sell less with high profits? What are the pros and cons to the employer, worker, and customer? i.e. high revenue low profit, vs low revenue high profit? Classical economic theory suggests firms will seek to maximise profits. The benefits of maximising profit …
Supermarkets have strict criteria for the cosmetic appearance of fresh fruit and vegetables. The result of these criteria is that a high percentage (10-40%) of a farmers harvest can be rejected because the vegetables do not meet these standard rules of conformity. This problem of rejected vegetables was highlighted on a recent BBC programme ‘War …
TIPP (Transatlantic Trade and Investment Partnership) is a potential trade deal between the EU and US. It is currently being negotiated by the European Commission and the US. The aim of the agreement is Encouraging trade and investment between the EU and the US. Extend principles of European Single Market to include the US, enabling …