What social function is served by profits in a capitalist economic system?

CA Foundation · Business Economics · MTP · June 2024
What social function is served by profits in a capitalist economic system?
(A) A. Taxes on profits support government programs.
(B) B. They provide an incentive for the reallocation of resources.
(C) C. Profits allow individuals to accumulate wealth and engage in capital investment.
(D) D. Profits result in higher levels of employment.

Suggested Answer and Working Notes:

Correct Answer: Option (B)

B. They provide an incentive for the reallocation of resources.

Topics: Nature & Scope of Business Economics

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