Answer to Question #86199 in Microeconomics for Nara

Question

The profitability of firms is a measure of their efficiency. The higher the profit, the greater the efficiency. High profits should, therefore, be encouraged. Do you support this argument?

Answer 1

I agree with the statement that the higher the profit, the greater the opportunities for realizing the interests of the owners, managers and staff.

Of course, profitability and profit are closely interrelated and equally affect the efficiency of activity, but they also have a number of differences. For example, the main difference is that profit is an absolute value, and profitability is relative. Also, another difference is that the profit is an objective value, despite the fact that there are divisions into pure and gross, and profitability is considered a powerful tool in assessing any branches of the enterprise.