Question

1) A firm has $200 million in total revenue and explicit costs of $190 million. If its owners have invested $100 million in the company at an opportunity cost of 10 percent interest per year, the firm's accounting profit is:

$400 million.

$100 million.

$80 million.

$10 million.

zero.

2) If a firm produces a quantity at which total revenue equals total cost, then:

economic profit is positive.

economic profit equals accounting profit.

economic profit is zero.

economic profit is negative.

3) In the article about perfect competition ( the cupcakes) , the milk producers can easily distinguish their product by

marketing

radio ads

direct marketing

not possible

Answer 1

1)  A firm has $200 million in total revenue and explicit costs of $190 million. If its owners have invested $100 million in the company at an opportunity cost of 10 percent interest per year, the firm's accounting profit is simply revenue minus cost=200-100= $100 million.

2) If a firm produces a quantity at which total revenue equals total cost, then economic profit is zero.

3) In perfect competition the goods are exactly similar and homogeneous so the milk producers cannot distinguish their products