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Central Role of Economic Profit - Essay Example

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To understand this, a case study involves a theater that has seating for 1,200 people. For the past days, tickets have been sold out since they were affordable, cost $ 5 per ticket. The manager would like to increase tickets…
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Central Role of Economic Profit
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Central Role of Economic Profit

Download file to see previous pages... As an outcome, one can have a considerable accounting profit with slight to no economic profit. In the case scenario, cost of preparing tickets and preparing the theater could be price of input and the ticket sale is the revenue.
Reduction in sale of tickets will reduce with increase of prices. The business could continue to make accounting profit; however, this may not sustain the business for long. Economic profit role is to ensure that resources are directed toward the practices that generate the most profit. Profit is a sign that the clients of that service or good want more of it (Malloy, 2004). The action of manager would not generate the most profit out of the theater due to decrease in attendance. If the prices are doubled and attendance reduce by more than a half due to other factors like immediate competitors then the business would ...Download file to see next pagesRead More
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