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Chapter 29: Problem 16

Which economist believes all profits are linked with uncertainty and risk? (LO6, 7) a) Frank Knight c) Karl Marx b) Joseph Schumpeter d) John Maynard Keynes

Short Answer

Expert verified
The correct answer is a) Frank Knight. He was an influential American economist who believed that all profits are linked with uncertainty and risk, as discussed in his 1921 book, Risk, Uncertainty, and Profit.

Step by step solution

01

Recognize the economist associated with uncertainty and risk

Review the provided list of economists and identify which one is known for associating all profits with uncertainty and risk.
02

Identify the correct answer

From the list provided, the economist who believes all profits are linked with uncertainty and risk is Frank Knight.
03

Provide explanation about Frank Knight's view

Frank Knight (1885-1972) was an influential American economist who distinguished between risk and uncertainty in his 1921 book, Risk, Uncertainty, and Profit. According to his view, risk can be quantified, managed and priced, while uncertainty refers to unanticipated events that cannot be accurately predicted or quantified. Profits, in Knight's framework, exist because of these uncertain conditions faced by entrepreneurs in the market.

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