Economic profit is the best measure of a firm's performance because
A. economic profit fully accounts for all sources of revenue.
B. the opportunity cost of using ALL resources is subtracted from total revenue.
C. normal profit is generally too difficult to measure.
D. only explicit costs influence managerial decisions since, in general, only explicit costs can be subtracted from revenue for the purposes of computing taxable profit.
Answer: B
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If a hospital knows that an insurance company will pay for most of a patient's bill, the hospital has more of an incentive to require additional medical procedures and tests, even if the patient may not require them. This is an example of
A) moral hazard. B) adverse selection. C) asymmetric information. D) the principle-agent problem.
In the long run, the supply of goods is based on
a. the availability of the resources and the costs of production. b. the availability of the resources and the level of consumers’ incomes. c. the costs of production and consumer preferences. d. government regulations.
Suppose that country A produces mostly consumption goods and few investment goods, while country B produces mostly investment goods with few consumption goods. Other things constant, which of the following is most likely to happen in the future?
a. The per capita income of country A will grow more rapidly than country B. b. The population of country B will grow more rapidly than country A. c. The production possibilities curve (PPC) of country B will shift out more rapidly than the PPC of country A. d. The production possibilities curve (PPC) of country A will shift out more rapidly than the PPC of country B.
Pay-for-performance has sharply improved the quality of care.
a. true b. false