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March 17, 2020

economic profits and losses

C) contribute to a more equal distribution of income. Profits and Losses with the Average Cost Curve. Recall from previous lectures that firms use their average cost (AC) to determine profitability. Unfortunately, they lack an understanding of the formation and function of profits and losses in a free market economy. – 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 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). Does maximizing profit (producing where MR = MC) imply an actual economic profit? Why? B. are essential to the reallocation of resources from less desired to more desired goods. How do you feel about business profits and losses? 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 … Are profits bad? And if profits are bad, are losses good? 3. B) achieve full employment and price level stability. 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 He actually sustains an economic loss of $9,000. The reliability of the financial results and analysis of economic activity depend on the accuracy of its calculation. D. equalize the distribution of income in the long run. Responses to Profits and Losses • Will the firm remain in business in the long run? A profit and loss report is based on the calculation of profit (loss). Accounting profit is one of the critical indicators. When you know this fact, his decision to switch careers doesn’t seem like such a good idea. Average cost in this example is average total cost (ATC). Economic profits and losses: A. are both considered by economists to be a part of production costs. 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. 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. D. equalize the distribution of income in the long run. C. have no influence on the composition of domestic output. Most people have strong feelings about these questions. Economic profits and losses: A. are both considered by economists to be a part of production costs. B. are essential to the reallocation of resources from less desired to more desired goods. Accounting Profit: How to Calculate. 36. The answer depends on firm’s profit margin (or average profit), which is the relationship between price and average total cost. Many economic issues concern profit and loss. Economic profits and losses: A. Economists like to concentrate on economic profits and losses rather than accounting profits or losses because the economic profits and losses … D) reallocate resources from less desired to more desired uses. Why? And loss report is based on the accuracy of its calculation ) reallocate resources from desired... Loss report is based on the calculation of profit ( loss ) the reallocation of resources from less desired more! They lack an understanding of the financial results and analysis of economic depend... Analysis of economic activity depend on the composition of domestic output switch careers doesn ’ t seem like such good! 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