Question

Normal profit is:

Answers:	a) not an economic cost because a firm can avoid this payment.
	b) not an economic cost because it need not be realized for a firm to retain the owner’s entrepreneurship.
	c) an economic cost because it is the opportunity cost of the owner’s resources used for production.
	d) an explicit cost.

If a firm decides to produce no output in the short-run, its costs will be its:

Answers:	a) sunk costs.
	b) total variable costs.
	c) marginal costs.
	d) total fixed costs.

Answer 1

Q1
ANswer
Option c
an economic cost because it is the opportunity cost of the owner’s resources used for production.
A normal profit is equal to the economic costs.
A firm make a normal profit if the economic profit is zero.
Economic profit =accounting profit -economic costs
0=accounting profit -economic costs
accounting profit =economic costs
The profit is called normal profit as it is equal to economic costs.

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Q2
Answer
Option d
A firm shut down then the costs to the firms are only fixed costs as the variable costs changes with production and VC is zero at zero output, so the firm has total costs equal to fixed cost.