Asked by
Nuttakorn Manee
on Dec 11, 2024
Verified
The owners of a firm are earning economic profit if
A) return on their capital is lower than the opportunity cost of employing that capital in their industry.
B) their total revenues exceed the monetary payments to labor and other resources in the long run after all plant size adjustments are made.
C) price exceeds average variable costs at the shutdown point.
D) they are earning a return on their capital that is higher than what can generally be earned in other markets.
Economic Profit
The difference between a firm’s total revenue and its total costs, including both explicit and implicit costs.
Opportunity Cost
The cost of forgoing the next best alternative when making a decision or choice.
Monetary Payments
Transactions involving the transfer of money in exchange for goods or services.
- Comprehend the significance of economic profits and losses in distributing resources and market signaling mechanisms.
- Understand the difference between economic profit and accounting profit within competitive markets.
Verified Answer
LG
Learning Objectives
- Comprehend the significance of economic profits and losses in distributing resources and market signaling mechanisms.
- Understand the difference between economic profit and accounting profit within competitive markets.
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