Managerial Economics

Topics: Profit, Economics, Adam Smith Pages: 1 (271 words) Published: September 12, 2013
Murzakarimova Balzhan
Management 343
Q1.6 Which concept—the business profit concept or the
economic profit concept—provides the more appropriate
basis for evaluating business operations? Why?
Businesses i know are there to maximize profit and minimize cost.On this basis,i think the business profit concept is the most appropriate basis for evaluating business operations because banks,lenders or creditors will the creditworthiness of such business if loan or any other facility has been advanced to such business to see whether they can offset such debt if given to them. Q1.7 Some argue that prescription drug manufacturers,

like Pfizer, gouge consumers with high prices and make
excessive profits. Others contend that high profits
are necessary to give leading pharmaceutical companies
the incentive to conduct risky research and development.
What factors should be considered in examining the
adequacy of profits for a firm or industry?
Q1.8 Why is the concept of enlightened self-interest
important in economics?
Acting in the way that is most personally beneficial. Adam Smith, the father of modern economics, famously explained that it is possible to achieve the best economic benefit for all even when, and in fact because, individuals tend to act in their own self-interest. Smith wrote, "It is not from the benevolence of the butcher, the brewer or the baker that we expect our dinner, but from their regard to their own self-interest." Smith's explanation of the invisible hand showed that through the self-interested actions of dozens, hundreds and even thousands of people, without any centralized planning, goods and services get created that benefit both producers and consumers.
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