A normal profit is:
A zero economic profit
Revenues less explicit cost
About 10% for most industries
A zero accounting profit
Correct Answer :
A. A zero economic profit
Zero economic profit means normal profit. Zero economic profit does not mean zero accounting profit. The accountant will calculate total cost using only explicit costs (basically a transfer of money) that the firm makes. On the other hand, economists will factor in opportunity cost as well. This all means that economists will calculate higher costs, which means that economic profit is lower than accounting profit. The firms under perfect competition in longrun will always earn zero economic profit due to large number of firms in industry, but actually they earn some positive amount of accounting profit.}
Related Questions
Which of the following would be least likely to cause a consumer to eat less beef?
An increase in the price of beef
An increase in the price of lamb
A reduction in the consumers income
A reduction in the price of lamb
Government planners play a central role in allocating resources:
Only under socialism(communism)
Only under capitalism
Under both (a) and (b)
None of the above
A vertical supply curve parallel to the price axis implies that the elasticity of supply is:
Zero
Infinite
Equal to one
Greater than zero but less than infinite
Nash equilibrium says:
I am doing the best, I can given what you are doing
You are doing the best, you can given what I am doing
Both a and b
None of the above
If by doubling all inputs in the long run output is less than double, it is a case of:
Increasing returns to scale
Decreasing returns to scale
Constant returns to scale
Variable returns to scale
Capital Saving Technological Progress can be defined as:
Technological progress that causes to raise the marginal product of capital and labor in the same proportion
Technological progress that causes the marginal product of capital to increase relative to the marginal product of labor
Technological progress that causes the marginal product of labor to increase relative to the marginal product of capital
None of the above
Labor theory was firstly rejected by:
Adam Smith
Karl Marx
Ricardo
Pigou
Money spent by a firm on the purchase of capital equipment is:
Fixed cost
Variable cost
Both fixed and variable costs
None of the above
In case of monopoly, TR curve rises at a:
Constant rate
Decreasing rate
Increasing rate
None of the above
The Cambridge School of Thought refers to the group of English economists who came under the influence of:
Alfred Marshal
J.M.Keynes
Paul A.Samuelson
A.C.Pigou
Demand for a commodity is elastic when it has
Only one use
Many uses
Uses which cannot be postponed
Uses very essential for the consumer
The Tit for Tat strategy means cooperation by the 2nd firm if:
1st firm does not cooperate
1st firm cooperates
1st firm collapses
None of the above
The Law of Proportionality is another name of:
The law of diminishing marginal utility
The law of demand
The Law of Diminishing Returns
The law of supply
Which is not an essential feature of a socialist economy?
Social ownership of the means of production
Freedom of enterprise
Use of centralized planning
Government decisions
In monopolistic competition, the firm compete on the basis of:
Price
Entry
Both a and b
None of the above
The market demand for any commodity is the:
Average requirement for it in any given place
Amount of it wanted at any given price
Amount that people would like to buy during a period at different prices
Quantity needed to maintain a given standard of living
An indifference curve normally slopes downward from:
Left to right
Right to left
Both of them
None of them
The number of sellers in oligopoly are:
Two
Many
Four
Very few
The cobweb model will convergent when the slope of:
Demand curve is more than supply curve
Supply curve is more than demand curve
Supply curve is equal to demand curve
None of the above
The firms in non-cooperative games:
Enforce contracts
Make contracts
Make negotiations
Do not make negotiations
The number of sellers in oligopoly is:
Two
One
Very large
A few
In the case of two factor inputs which are neither perfectly complementary nor perfect substitutes, the iso-product curve will be:
A downward sloping straight line
A downward sloping curve
An upward rising curve
Right angled iso-quants
In an indifference curve diagram, when the price of a product increases, the decline in quantity demanded that results if consumers utility or welfare is kept constant is referred to as the:
Utility effect
Budget line effect
Substitution effect
Income effect
A firm in a position of equilibrium is supposed to be maximizing:
Output
Sales
Profits
None of the above
In monopolistic competition, the firms follow:
Exotic behavior
Sympathetic behavior
Myopia behavior
Regular behavior
Extension (expansion) and contraction of demand are result of:
Change in consumers income
Change in consumers tastes
Change in price
None of the above
If cross-elasticity of one commodity for another turns out to be zero, it means they are:
Close substitutes
Good complements
Completely unrelated (independent goods)
None of the above
AR curve under perfect competition:
Slopes downwards to the right
Slopes upward to the right
Is vertical to the x-axis
Is horizontal to the x-axis
In cournot model, each firm makes decision regarding:
Price
Output
Cost
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In monopoly, the relationship between average revenue and marginal revenue curves is as follows:
Average revenue curve lies above the marginal revenue curve
Average revenue curve coincides with the marginal revenue curve
Average revenue curve lies below the marginal revenue curve
Average revenue curve is parallel to the marginal revenue curve