Question

Write a note on the Risk-bearing Theory of Profit.

Answer 1

1. Risk – the bearing theory was propounded by F.B.Hawley in 1907.
2. Profit is the reward for “risk-taking” in business.
3. Every business involves some risks. So risk-taking is an essential function of the entrepreneur and is the basis of profit.
4. The higher the risks, the greater are the profit.
5. Profit induces entrepreneurs to undertake risks.