a) The owners of firms in the real world would generally expect (in the long run at least) to have some positive of profits on their accounting statements. However, in economic models we usually assume that firms will be willing to operate for zero economic profits even for the long term. Explain why this is the case.

a) The owners of firms in the real world would generally expect (in the long run at least) to have some positive of profits on their accounting statements. However, in economic models we usually assume that firms will be willing to operate for zero economic profits even for the long term. Explain why this is the case.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Desmond works as an accountant making $80,000 per year. He is considering leaving his job to open an artisanal cheese shop. He estimates that he will need to spend $20,000 per year on space, $10,000 per year on supplies and $40,000 per year on staff. The shop will earn will earn $120,000 per year in revenue. Assuming his estimates are accurate, what will Desmond's accounting profit be? Assuming his estimates are accurate, what will Desmond's economic profit be? Please enter your solution without commas, dollar signs, or cents.
Suppose a firm produces bicycles will the firms accounting statement reflect the opportunity cost of the bicycles why or why not?
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Companies can typically maximize their profits by operating at the minimum average total cost curves, independent of the economic environment. Is this statement true or false? Explain.
The correct answer to whether it should be produced is that the firm should produce in the short term if it can either make a profit or a loss less than its total costs. True or false
Why is knowing (or estimating) the product demand so crucial for a firm? What are the differences between estimating and forecasting demand? In your response, include an example of a business that has suffered from poorly forecasting the demand of its products. Evaluate how or why the business made such a mistake.To keep our discussion more interesting, please use examples that are not from our textbook.
Consider a firm that uses capital and labor as inputs and sells 5,000 units of output per year at the going market price of $10. Also assume that total labor costs to the firm are $45,000 annually. Assume further that the total capital stock of the firm is currently worth $100,000, that the return available to investors with comparable risks is 10 percent annually, and that there is no depreciation. Calculate the economic profit and accounting profit of this firm? Explain your answer.?
3. Definition of economic costs Jacques lives in San Francisco and runs a business that sells guitars. In an average year, he receives $711,000 from selling guitars. Of this sales revenue, he must pay the manufacturer a wholesale cost of $411,000; he also pays wages and utility bills totaling $279,000. He owns his showroom; if he chooses to rent it out, he will receive $1,000 in rent per year. Assume that the value of this showroom does not depreciate over the year. Also, if Jacques does not operate this guitar business, he can work as a financial advisor and receive an annual salary of $31,000 with no additional monetary costs. No other costs are incurred in running this guitar business. Identify each of Jacques's costs in the following table as either an implicit cost or an explicit cost of selling guitars. Implicit Cost Explicit Cost The wholesale cost for the guitars that Jacques pays the manufacturer The wages and utility bills that Jacques pays The rental income Jacques could…