Question

Economic profit enables a firm to

Group of answer choices

a) maximize revenues.

b) serve customers the firm’s way.

c) obtain profit while being inefficient.

d) not include opportunity cost to complicate calculations.

e) maximize profit and minimize costs.

Answer 1

In any market structures, a firm is able to earn economic profits only by restricting its output. For example in monopoly, the monopolist restricts it Output in order to earn Economic Profits. Now, when a firm restricts its output, there is inefficiency involved because the firm doesn't produce that output which it would have if it could charge the price equal to its Marginal cost which is the Efficient output. So the firm becomes inefficient because of the production of lower Output than the Efficient output.

Hence, economic profit enables a firm to obtain profit while being inefficient.

Therefore, Option c is correct.