Question

14.  

A firm making zero economic profits in the LR is broke.T/F

15.  

Economic profits are found by:

A.  TR + TC

B.  TR - (accounting cost + opportunity cost)

C.  TR + accounting cost

D.  TC + opportunity cost - accounting cost

16.  

A firm in a perfectly competitive industry is making losses. Thus, it should increase its price above the market price in order to offset losses.

17.  

A firm making zero economic profits will need to close down and then eventually exit the industry since they are not profitable.T/F

18.  

Assume firms in a competitive industry are making economic profits > 0 (also called supranormal profits). Which of the following is TRUE?

		A.  The firm has no incentive to exit the industry because they will make less in their next best alternative.
		B.  Firms will want to exit this industry
		C.  The firm can do better by moving to another industry

Answer 1

Q14
Answer
false
the zero economic profit means normal return on the investment or the return can be earned on the best alternative
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Q15
option B
Economic profit=TR-accounting cost -opportunity cost
The economic profit consider opportunity costs as costs in the calculation

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Q16
False
the firm cannot change the price otherwise loos all the sell
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Q17
False
the zero economic profit means normal return on the investment or the return can be earned on the best alternative
the firm continue in that market
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Q18
A. The firm has no incentive to exit the industry because they will make less in their next best alternative.
the zero economic profit means normal return on the investment or the return can be earned on the best alternative