16 Jan

economic profits and losses

The answer depends on firm’s profit margin (or average profit), which is the relationship between price and average total cost. – If it covers ALL of its costs • Firms that earn normal profit recover only their opportunity cost • Firms that earn positive economic profit recover more than their opportunity cost • Markets in which firms are earning economic Many economic issues concern profit and loss. Economists like to concentrate on economic profits and losses rather than accounting profits or losses because the economic profits and losses … C. have no influence on the composition of domestic output. Why? How do you feel about business profits and losses? Most people have strong feelings about these questions. 36. 3. Chapter 7 – Opportunity Cost, Economic Profit and Losses, and the Miracle of Markets Business success has a clear and simple measure — the bottom line, or the profits that remain once you subtract all costs from your revenues. A profit and loss report is based on the calculation of profit (loss). Are profits bad? Accounting Profit: How to Calculate. Recall from previous lectures that firms use their average cost (AC) to determine profitability. Profits and Losses with the Average Cost Curve. B. are essential to the reallocation of resources from less desired to more desired goods. D) reallocate resources from less desired to more desired uses. The reliability of the financial results and analysis of economic activity depend on the accuracy of its calculation. Average cost in this example is average total cost (ATC). D. equalize the distribution of income in the long run. C. have no influence on the composition of domestic output. Are essential to the reallocation of resources from less desired to more desired good B. Equalize the distribution of income in the long run C. Are both considered by economist to be a part of production costs D. Have no influence on the composition of domestic output Accounting profit is one of the critical indicators. Does maximizing profit (producing where MR = MC) imply an actual economic profit? B) achieve full employment and price level stability. When you know this fact, his decision to switch careers doesn’t seem like such a good idea. C) contribute to a more equal distribution of income. Unfortunately, they lack an understanding of the formation and function of profits and losses in a free market economy. Economic profits and losses: A. And if profits are bad, are losses good? A monopolist calculates its profit or loss by using its average cost (AC) curve to determine its production costs and then subtracting that number from total revenue (TR). He actually sustains an economic loss of $9,000. B. are essential to the reallocation of resources from less desired to more desired goods. From society’s point of view the economic function of profits and losses is to: A) promote the equal distribution of real assets and wealth. Economic profits and losses: A. are both considered by economists to be a part of production costs. Economic profits and losses: A. are both considered by economists to be a part of production costs. Why? The profit and loss (P&L) statement is a financial statement that summarizes the revenues, costs, and expenses incurred during a specified period, usually a … Responses to Profits and Losses • Will the firm remain in business in the long run? D. equalize the distribution of income in the long run. $ 9,000 lack an understanding of the formation and function of profits and:! Distribution of income in the long run ) reallocate resources from less desired more! A part of production costs income in the long run more equal distribution of in! Distribution of income in the long run imply an actual economic profit ATC ) actual economic?... 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