Suppose that a firm earned $500,000 in total revenue. At the same time, it incurred labor costs of $200,000; economic depreciation of $50,000; normal profit of $75,000; interest paid to the bank of $25,000; and used other factors of production that
cost $100,000. The economic profit earned by the firm equals A) $275,000.
B) $175,000.
C) $50,000.
D) $200,000.
E) $500,000.
C
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Growth in physical capital depends most directly upon the
A) speed of population growth. B) amount of saving and investment. C) amount of government expenditures. D) number of firms in the nation. E) level of human capital.
As macroeconomic conditions improve and consumers' incomes and wealth increase, their demand for many products tends to become ________ price inelastic. As such, the ability of firms to mark up price above cost will ________
A) more; increase B) more; decrease C) less; increase D) less; decrease
By the accelerator hypothesis, if a firm's actual sales jump in one period to a higher maintained level, that firm's replacement investment
A) also jumps in one period to a higher maintained level. B) gradually drifts upward to a higher maintained level. C) jumps upward and then falls back to zero. D) jumps upward and then falls back part of the way.
Economists consider economic depreciation to be the ________ in market value from the use of the capital and measure this use in terms of ________ cost.
A) increase; marginal B) decrease; opportunity C) increase; opportunity D) decrease; marginal