A lawyer quits his job at a top legal firm where he was making $100,000 per year. He was just informed that his late aunt has bequeathed to him $1 million in cash. He decides to use all of the money to open and run his own hardware store
Assume at the end of the first year of business that his accountant has informed him that he earned a $90,000 accounting profit. Why would an economist not be quite as impressed? Explain.
An economist would not be impressed because he has not taken into account all his opportunity cost. The first one of course is the $100,000 that he could have been earning had not quit the law firm. That puts him $10,000 in the red right out of the starting gate. The second one of course is the forgone interest that could have been earned from the $1 million that could have been invested elsewhere. In short the economist would conclude that he has made a loss.
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The monopolist faces:
a. a perfectly inelastic demand curve. b. a perfectly elastic demand curve. c. the entire market demand curve. d. all of these.
Many in Congress expect that future Social Security tax collections will fall short of the sum that will be needed to cover promised benefits. How can it cover this shortfall, and what are the problems associated with these solutions?
To maximize profit a perfectly competitive firm supplies a good up to the point at which
A. the marginal revenue is higher than the marginal cost. B. the marginal cost of producing the good is zero. C. the average revenue equals average cost. D. the price of the good equals marginal cost.
An internal economies of scale is defined as
A) an industry with costs that fall for all firms. B) a firm with falling costs over a specific level of output. C) a firm with falling costs over a relatively large range of output. D) a firm with falling costs over a relatively large range of output, but definite declining profits.