From the firm's perspective, is an accounting profit of zero a good result, a bad result, or merely a satisfactory result? Why? Is an economic profit of zero a good result, a bad result, or merely a satisfactory result? Why?
An accounting profit of zero is most likely a bad result because the firm generated only enough revenues to cover explicit cost meaning that there was no compensation for the time, investment or other opportunity costs associated with the operations. In contrast, an economic profit of zero indicates a satisfactory result because total revenues were sufficient not only to cover all explicit costs but also to provide a fair rate of return on the time, money, and other opportunity costs associated with operating this firm.
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Refer to Figure 23-1. According to the figure above, at what point is aggregate expenditure greater than GDP?
A) J B) K C) L D) none of the above
The government will have to subsidize a natural monopoly in the long run if regulators choose to pursue:
a. marginal cost pricing b. fair-return pricing. c. per se pricing.
Last year the Olsen family earned $70,000 . This year their income is $77,000 . In an economy with an inflation rate of 8 percent, we can conclude that the Olsen's nominal income:
a. and real income both increased. b. and real income both decreased. c. increased, but their real income decreased. d. decreased, but their real income increased.
A negative supply shock often results in:
a) a leftward shift of the AD curve. b) an increase in the aggregate price level and a decrease in aggregate output. c) no change in the price level. d) a drop in the unemployment levels.