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When a firm is earning positive economic profit, it means that its total revenue exceeds its total costs, including both explicit and implicit costs. This indicates that the firm is not only covering its operating expenses but also generating a return that exceeds what it could have earned in the next best alternative. Positive economic profit often signals that the firm has a competitive advantage or is operating efficiently in its market. Additionally, it can attract new entrants to the market, potentially leading to increased competition over time.
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Would a firm earning zero economic profit continue to produce in the long run?
No, a firm earning zero economic profit would not continue to produce in the long run because it would not be covering all its costs, including opportunity costs.
What factors contribute to a firm earning zero economic profit?
A firm may earn zero economic profit due to factors such as high competition, low barriers to entry, high production costs, and pricing strategies that do not cover all expenses.
What factors contribute to a firm earning less than a normal profit?
Several factors can contribute to a firm earning less than a normal profit, including high competition in the market, high production costs, inefficient operations, and external factors such as changes in consumer preferences or economic conditions. These factors can lead to lower revenue and higher expenses, resulting in a firm earning less than a normal profit.
If a perfectly competitive firm's price is above its average total cost the firm?
is earning a profit
Will economic profit exceed accounting profit?
Economic profit will never exceed accounting profit. The accountant will calculate total cost using only explicit costs (basically a transfer of money) that the firm makes. On the other hand, economists will factor in opportunity cost as well. For example, if a person takes their life's savings and invests it in a new company, the interest that the money could be making will be an opportunity cost for the firm, as well as the salary they could be earning at a different firm. This all means that economists will calculate higher costs, which means that economic profit is lower than accounting profit.
Would a firm earning zero economic profit continue to produce in the long run?
No, a firm earning zero economic profit would not continue to produce in the long run because it would not be covering all its costs, including opportunity costs.
What factors contribute to a firm earning zero economic profit?
A firm may earn zero economic profit due to factors such as high competition, low barriers to entry, high production costs, and pricing strategies that do not cover all expenses.
What factors contribute to a firm earning less than a normal profit?
Several factors can contribute to a firm earning less than a normal profit, including high competition in the market, high production costs, inefficient operations, and external factors such as changes in consumer preferences or economic conditions. These factors can lead to lower revenue and higher expenses, resulting in a firm earning less than a normal profit.
If a perfectly competitive firm's price is above its average total cost the firm?
is earning a profit
What is the Difference between Normal profit and Economic Profit?
In economics, normal profit is often called the break-even point. It is the level of profit where all of the costs of your business, including the salary of the CEO, are covered. When a firm has normal profit but not economic profit, the total revenue of the firm equals the total cost of the firm. However, if a firm has economic profit, total revenue is higher than total cost.
Which firm is good leveraged or unleveraged while firm is getting profit?
leveraged firm is good because it has low risk than unleveraged firm while earning same amount of profit.
Will economic profit exceed accounting profit?
Economic profit will never exceed accounting profit. The accountant will calculate total cost using only explicit costs (basically a transfer of money) that the firm makes. On the other hand, economists will factor in opportunity cost as well. For example, if a person takes their life's savings and invests it in a new company, the interest that the money could be making will be an opportunity cost for the firm, as well as the salary they could be earning at a different firm. This all means that economists will calculate higher costs, which means that economic profit is lower than accounting profit.
Explain why a business firm's economic objectives have something to do with markets?
* Profit Earning * Employment generation * Demand creation * Risk taking * Survivul & Growth * Contribution to regional economy * Profit Earning * Employment generation * Demand creation * Risk taking * Survivul & Growth * Contribution to regional economy
The balance sheet shows whether or not the firm achieved its primary objective of earning a profit?
False
Is economic profit a cost of production?
Economic profits are not costs of production since the entrepreneur does not require the gaining of an economic profit to keep the firm operating. In economics, costs are whatever is required to keep a firm operating.
What importance are average cost and marginal cost in economic analysis?
Average cost: determines the accounting profit maximisation and minimal point where the firm can remain profitable. Marginal cost: determines economic profit maximisation and minimal 'shut-down' point where the firm should still operate, even if at an accounting loss. Note: Average cost (AC) and marginal cost (MC) are related. The rate of change of AC is always positive when MC is positive.
Can a monopolistic competitive firm earn long run profit?
In the long run, if a firm is making a profit more firms will enter. This will cause profit to drop. Firms will eventually drop out because of this and economic profit will makes it way to zero(a result of the invisible hand).
