Which of the following statements regarding accounting and economic profits is FALSE?
A. Economic profits = total revenue - (explicit + implicit costs)
B. Economic profits can be zero even if accounting profits are positive.
C. Accounting profits can be negative if economic profits are positive.
D. Accounting profits = total revenue - explicit costs
Answer: C
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In the above figure, at any price between $8 per unit to $12 per unit, how many units will a profit-maximizing perfectly competitive firm produce?
A) None, because the producer will never choose to operate at a loss. B) Less than 20 because this will reduce marginal cost. C) Between 20 and 30, because variable costs are covered so the firm's losses will be minimized by producing rather than shutting down. D) More than 30, because variable costs are covered so that the producer can earn economic profits.
Which of the following will shift the consumption function upward?
a. An increase in consumer wealth. b. An increase in the interest rate. c. An increase in personal income taxes. d. A decrease in the MPC. e. An increase in disposable income.
If the government were to increase income taxes, we would predict:
A. a shift in aggregate demand to the right. B. a downward movement along the aggregate demand curve. C. a shift in aggregate demand to the left. D. an upward movement along the aggregate demand.
If the market price for a good produced by a price taking firm is $8, the firm's total revenue is
A. downward sloping. B. a flat line at P=$8. C. parabolic. D. an upward sloping line beginning at the origin and having a slope of 8.