Profits, Entry and Exit: the Basis for the 'Invisible Hand

5 important questions on Profits, Entry and Exit: the Basis for the 'Invisible Hand

The economic theory of business behavior is built on the main assumption that:

The firm's goal is to maxime its profit

Economic profit (or supernormal profit/excess profit) is:

The difference between a firm's total revenue and the sum of its explicit costs and implicit costs (the opportunity costs of the resources supplied by the firm's owners).

In economics 'economic rent' (or simply rent) is:

That proportion of the payment for an input that is above the supplier's reservation price for that input, which is by defining the supply price of that input.
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The present value of money is:

For an annual interest rate r, the present value (PV) of a payment (M) to be received T years from now is the amount that would have to be deposited today at interest rate r to generate a balance M.
So: PV = M/(1+r)^T

The efficient market hypothesis is:

The theory that the current price of stock in a company reflect all the relevant information about its current and future earnings prospects.

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