Chapter 6 - The Role of Profits and Losses

Reliability

is an inherent accompaniment of the physical product when keeping customers is a matter of economic life and death under capitalism, whether at the manufacturing level or the retail level.

business enterprise

in a market economy finds ways to lower its costs, competing enterprises have no choice but to scramble to try to do the same.

Socialist economies

not only lack the kinds of incentives which force individual enterprises toward efficiency and innovation, they also lack the kinds of financial incentives that lead each given producer in a capitalist economy to limit its work to those stages of production and distribution at which it has lower costs than alternative enterprises.

Profit

may be the most misconceived subject in economics.

Free market capitalism

Under this, the incentives work in the opposite direction.

Economies of scale

Large fixed costs are among the reasons for lower costs of productions per unit of output as the amount of output increases.

Costs

vary not only with the volume of output, and to varying degrees from one industry to another, they also vary according to the extent to which existing capacity is being used.

Unutilized Capacity

can cause price anomalies in many sectors of the economy.

Third world countries

have tended to have more middlemen than more industrialized nations have