Distinguish between the economist's definition of profit and the accountant's definition. Which is superior for decision making?
Accounting profit is revenue minus actual, out-of-pocket costs. Economic profit is revenue minus total costs, including the opportunity cost of all factors. Accounting profit typically is greater than economic profit. Although more difficult to compute, economic profit is superior because it incorporates the concept of opportunity cost of resources, including capital and the owner's forgone earnings.
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Which of the following is a characteristic of a competitive market?
a. There are many buyers but few sellers. b. Many firms have market power because they own patents. c. Buyers and sellers are price takers. d. Firms sell differentiated products.
When goods are subject to market failure, all of the following are possible solutions to the market failure except:
A. privatize the good. B. have government either regulate the market or provide the good. C. set a very specific consumer quota on consumption. D. change social norms.
According to the text, which of the following statements BEST describes U.S. factor abundance in 1947?
a. Taking into account different labor productivities, the U.S. "effective" labor force was much larger than the "effective" labor force in the rest of the world. b. Taking into account different labor productivities, the U.S. '"effective" labor force was much smaller than the "effective" labor force in the rest of the world. c. Taking into account productivities of capital in different industries, the U.S. "effective" capital stock was much smaller than the '"effective" capital stock force in the rest of the world. d. Corrected data indicate that the United States was actually was a laborabundant and capitalpoor country in 1947.
A decrease in the supply of dollars and a decrease in the demand for Japanese yen
A. increases the yen price of dollars. B. increases the value of the yen. C. does not change the exchange rate between dollars and yen. D. increases the value of the dollar.