Question

A perfectly competitive firm is producing at a point where marginal revenue is less than marginal cost. This firm should increase its output.T/F

9.  

A competitive firm is producing at a point where price is $32, marginal cost is $18, and average total cost is $37. From this we know that the firm has negative economic profits.T/F

Bob owns an accounting firm that has total revenue of $160,000. It has total variable costs of $50,000. It has fixed costs of $23,000. And in his next best alternative, Bob could make $46,000 as a staff accounting for a university.

10.1.  

What are Bob's accounting profits?

Bob owns an accounting firm that has total revenue of $160,000. It has total variable costs of $50,000. It has fixed costs of $23,000. And in his next best alternative, Bob could make $46,000 as a staff accounting for a university.

10.2.  

What is Bob's implicit cost?

Bob owns an accounting firm that has total revenue of $160,000. It has total variable costs of $50,000. It has fixed costs of $23,000. And in his next best alternative, Bob could make $46,000 as a staff accounting for a university.

10.3.  

What are Bob's explicit costs?

Bob owns an accounting firm that has total revenue of $160,000. It has total variable costs of $50,000. It has fixed costs of $23,000. And in his next best alternative, Bob could make $46,000 as a staff accounting for a university.

10.4.  

What is Bob's economic profit?

Bob owns an accounting firm that has total revenue of $160,000. It has total variable costs of $50,000. It has fixed costs of $23,000. And in his next best alternative, Bob could make $46,000 as a staff accounting for a university.

10.5.  

We would say that Bob has:

		A.  supranormal economic profits
		B.  negative economic profits
		C.  zero economic profits

Answer 1

1.
FALSE
If MC>MR then this firm needs to reduce output in order to maximize profits.
2.
TRUE
P=32
MC=18
ATC=37
P<ATC, therefore, there will be negative economic profits
3.
Accounting profits=87000
TR=160,000
TVC=50,000
FC=23,000
Accounting profits=Revenues-Explicit
=160,000-(50000+23000)
=87000
4.
Implicit cost=46000
5.
explicit costs=(50000+23000)=73000
6.
Economic profits=Revenues-Explicit-Implicit Costs
=160,000-(50000+23000)-46000
=41000
7.
A. supranormal economic profits