Innovation theory of profit was given by:
Options
AMarshall
BSchumpeter
CKeynes
DKnight
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Theory of Production and CostPYQ - June 2023Question 52 of 20
All Questions Correct Answer
✅ Option b — Schumpeter
All Options:
- AMarshall
- BSchumpeter
- CKeynes
- DKnight
Detailed Solution & Explanation
To determine who gave the innovation theory of profit, let's break it down:
• The innovation theory of profit suggests that profits are a result of innovative activities and entrepreneurial spirit, which leads to the creation of new products, services, or processes.
• This theory is closely related to the concept of entrepreneurship and the role of entrepreneurs in driving economic growth and development.
• Schumpeter, an Austrian-American economist, is known for his work on the role of innovation and entrepreneurship in economic development, which aligns with the innovation theory of profit.
• In contrast, Marshall is known for his work on supply and demand, while Keynes is known for his work on macroeconomic theories, particularly in relation to government intervention in the economy.
• Knight, on the other hand, is known for his work on risk and uncertainty, but his theories do not directly relate to the innovation theory of profit.
• Therefore, Schumpeter's work on innovation and entrepreneurship makes him the correct answer, as his theories directly support the innovation theory of profit.
About This Chapter: Theory of Production and Cost
Paper
Paper 4: Business Economics
Weightage
10%
Key Topics
Function, Cost Concepts (Short/Long Run)
This chapter explores how firms produce goods and services. It covers Production Functions, the Laws of Returns (Increasing, Constant, Diminishing), and all cost concepts including Total Cost, Average Cost, Marginal Cost, Fixed Cost, and Variable Cost. Understanding why the AC and MC curves are U-shaped is crucial for exam success.
View Official ICAI SyllabusExam Strategy Tip
The relationship between MC and AC curves is a favorite examiner topic. Remember: MC cuts AC at its minimum point. Also focus on the difference between Short Run and Long Run cost curves.
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