The Firm

Categories: Econ

A firm is a business, i.e., any entity that sells something and makes a profit. It might be Walmart selling everything almost everywhere, a one-man band as an LLC, selling music on the street corner, or anything in-between. Firms are what make our goods and services travel, and keep the lights of the economy on.

What do firms have in common? In the U.S., it's an Employer Identification Number (EIN). Like a Social Security number, but for firms.

The study of the firm is the realm of microeconomics. It largely assumes firms exist to maximize profits, and explores behavior and effects surrounding this end-goal.

Nothing to do with the book, but if you haven't read it, well, you should. Or see the movie. Cruise at his best. Ish.

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Finance: What are the economics of Uber?0 Views

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Finance Allah shmoop What are the economics of uber Ah

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uber you've seen it The little you thing there Yeah

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that designates it's an uber driver car Well from pretty

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much nowhere in two thousand eight Uber today is a

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big uber German for all over or everywhere so there

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are two flows of economics to this now enormous company

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One flow is about extra dough coming into their drivers

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on a given trip a driver collects eighteen dollars forty

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cents from the trip Uber gets twenty five per cent

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of that money or four dollars sixty cents in this

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instance anyway and the driver pockets the rest It was

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a nine mile trip It cost the driver about a

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dollar in gasoline and maybe figure another dollar in wear

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and tear and insurance and maintenance and occasional vomit clean

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up and well on that two dollars of expense The

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driver then keeps eleven dollars eighty cents for her time

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in gross profit Not a bad gig Getting three of

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those rides in an hour and it sure beats flipping

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burgers So that's one set of economics It's contractor work

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for the drivers who by the way as contractors can

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tax deduct a meaningful part of the cost of operating

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their car Since it qualifies as a business expense it's

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legit So then what about the four dollars sixty cents

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too Hoover What was uber's expenses Toe Earn that four

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sixty Well uber is basically a giant billing system at

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art They track and bill and clear in calendar drive

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units and make everything look all nice and pretty on

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a spreadsheet So there was a big fixed cost to

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initially build that giant database to track all of the

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driving events But then once the database was built well

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not a lot of expenses continue to Maine Chainat Uber

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also had to recruit tons and tons and tons of

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drivers like in a lot of cities That's their pinch

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point They can't get enough human beings who need or

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want the extra dough to just you know be around

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quickly enough so that uber demand er's get serviced quickly

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enough in that local area such that they don't either

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Goto lift their hated comm editor of Uber for God

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forbid call one of these yellow things Taxi That's what

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it was What recruiting drivers who are a legal be

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non convicted violent felons and see not suffering from extreme

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halitosis or B o is not easy There's a whole

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background checking process and all kinds of loitering and human

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resource ing and other stuff that has to go into

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this human filtration system All right well what other expenses

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Well insurance is a biggie Never know when a driver

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is gonna decide to take a shortcut through the Chicago

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River there Then there's government regulation that keeps hitting him

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or at least the threat thereof Read Mohr Lawyer Bills

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Yeah so yeah a lot of elements to noodle here

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But overall uber is doing just fine for itself In

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fact weed you know have to give them five stars

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