What is the difference between a normal profit and an economic profit?
What will be an ideal response?
A normal profit is the return to entrepreneurship and is part of the opportunity cost of operating a business. An economic profit is the difference between the firm's total revenue and its total opportunity cost. Because the normal profit is part of the firm's opportunity cost, an economic profit is a profit above and beyond a normal profit. If the firm earns an economic profit, the entrepreneur running the firm receives the normal profit plus the economic profit.
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The price in a contestable market is similar to that in a perfectly competitive market because
A) there are barriers to entry. B) there are no barriers to entry. C) there are many firms in the market. D) the firm can earn an economic profit in the long run.
One of the monetary policy goals of the Federal Reserve is price stability
Indicate whether the statement is true or false
Inflation targeting is a framework for carrying out monetary policy whereby
A) the central bank commits to a monetary growth rule. B) the central bank commits to achieving a publicly announced level of inflation. C) the central bank commits to achieving a target level of inflation which is never announced publicly. D) the central bank adopts a rigid target for inflation and ignores declines in output.
Which of the following is an intermediate good?
A. Tomatoes sold in the grocery store that you use to make salsa. B. Tomatoes grown in your garden that you use to make salsa. C. Tomatoes sold to a factory and used in the production of spaghetti sauce. D. Tomatoes you buy at a local farmer's stand that you use to make salsa.