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in business usage, the excess of total revenue over total cost during a specific period of time. In economics, profit is the excess over the returns to capital, land, and labour (interest, rent, and wages). To the economist, much of what is classified in business usage as profit consists of the implicit wages of manager-owners, the implicit rent on land owned by the firm, and the implicit interest on the capital invested by the firm’s owners. In conditions of competitive equilibrium, “pure” profit would not exist, because the competitive market would cause the rates of return to capital, land, and labour to rise until they exhausted the total value of the product. Should profits emerge in any field of production, the resulting increase in output would cause price declines that would eventually squeeze out profits. |