11. Fill in the blanks with the Vocabulary on the text.

1. In addition to wages, … and …, economists often talk about a fourth category of income called … .

2. Profits are defined as the difference between total … and total … .

3. … profits, start with total revenues from … .

4. In analyzing profits it is important … business … from economic … .

5. Business profits are the residual …, equal to sales less costs, measured by … .

6. Business profits include an implicit … on the capital … by firms.

7. Reported business profits are chiefly corporate … .

8. The main … of an enterprise in a market economy is … profit.

9. Any enterprise bears … .

10. Stability of a firm is achieved if … costs are equal to … revenue.

Prompts: to calculate, owned, revenues, profits (3), interest, sales, marginal (2), earnings, rent, costs, expenses, income, purpose, to distinguish, to maximize, accountants, return.

12. Find in the text definitions of the following:

Profits; business profits; economic profits; reported business profits.

7. From the text write out the sources of profit.

8. Ask questions to the underlined words.

1. Profits are defined as the difference between total revenues and total costs.

2. Firms generally own many of their own non-labour factors of production – capital, natural resources and patents.

3. It is important to compare average and marginal costs to define steady position of an enterprise.

13. Answer the questions on the text. Use the following expressions to begin your answer:

• The text tells the readers …

• I suppose …

• I think …

• I am certain that …

• If I got it right …

• It seems to me …

• In my opinion …

1. What are the categories of income?

2. How are profits defined?

3. How may profits be distinguished?

4. What are business profits?

5. What are economic profits?

6. What are reported business profits?

7. What are the sources of profits?

8. What is the main purpose of an enterprise in a market economy?

9. What is the rule of profit maximization?

10. How is stability of a firm achieved?

11. What is the result of an enterprise’s activity?

14. Agree or disagree. Correct wrong statements.

1. There are four categories of income: wages, interest, rent and profits.

2. Profits are the same as interest and returns.

3. Profits are defined as the sum between total revenues and total costs.

4. Business profits and economic profits are two different types of profits.

5. Business profits are the earnings after all costs are paid/

6. Economic profits include an implicit return on the capital owned by firms.

7. Economically it is necessary to distinguish different categories of profits.

8. The main purpose of an enterprise in a market economy is to maximize profit.

9. The rule of profit maximization is in the following: marginal products of all factors of production in terms of value are equal to their prices.

10. Only some enterprises bear expenses.

11. Stability of a firm is achieved if average cost are larger than marginal costs.

12. The result of an enterprise’s activity is total revenue and profit.