What is the difference between economic profit and normal profit?
What will be an ideal response?
Economic profit is what remains of the firm’s revenue after all its explicit and implicit opportunity costs have been deducted. Economic profit is a payment for entrepreneurial ability. Normal profit is the payment that is necessary to keep the entrepreneur in current work, and is thus a cost. Economic profit is the residual payment to entrepreneurs from total revenues after all other costs have been subtracted.
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The tax incidence on buyers is higher if ________
A) the buyers and sellers of a good are equally sensitive to price changes B) the elasticity of the market demand curve is higher than the elasticity of the market supply curve C) the elasticity of the market supply curve is higher than the elasticity of the market demand curve D) the number of sellers in a market is larger than the number of buyers
Suppose a rise in the price of peaches from $5.50 to $6.50 per bushel decreases the quantity demanded from 12,500 to 11,500 bushels. The price elasticity of demand is
A) 0.5. B) 1.0. C) 2.0. D) 1000.0.
Refer to the table below. Which drug should the senior manager not pursue?
The senior manager of Rx Pharmaceuticals needs to decide which of three drugs the company should consider developing. The estimated profit for each of the drugs differs depending on the market conditions when the respective drugs are introduced to the market. The above table summarizes the estimated profit for each drug under each of the three market conditions; Good, Fair, and Poor.
A) Drug Y
B) Drug X
C) Drug Z
D) all of the drugs
A cutthroat competitor will not lower their price because they believe that
A. their competitors will lower their prices too. B. their competitors will raise their prices. C. they will lose money. D. they will be accused of unfair competition.