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curve, a 3. What is the difference between economic profit and accounting profit? • Accountants measure only the direct costs. Economists measure all opportunity costs. $23-3a

curve, a 3. What is the difference between economic profit and accounting profit? • Accountants measure only the direct costs. Economists measure all opportunity costs. $23-3a

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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competitive firm is do differentiated nature of the products offered by the hrm. $23-2a • An oligopoly is a market in which a few firms are producing either differentiated or nondifferentiated products and entry is possible but not easy. $23-2a * The shape of the demand curve facing a firm in an oligopoly depends on how the firms interact. $23-20 • The marginal-revenue curve for all firms except those in perfect competition is downward sloping and lies below the demand curve. The marginal-revenue curve for the perfectly competitive firm is the same as the demand curve, a horizontal or perfectly elastic curve. $23-2b 3. What is the difference between economic profit and accounting profit? • Accountants measure only the direct costs. Economists measure all opportunity costs. $23-3a KEY TERMS accounting profit, 517 economic profit. 517 equity capital, 517 EXERCISES 1. Use the following to calculate profit at each quantity of output (Total) Output (a) 1 2 7 -☀ Price (P) $1,900 $1,700 $1,650 $1,600 $1,550 $1,500 $1,450 $1,400 $1,350 $1.300 Total Revenue (TR) $ 0 $ 1,700 $ 3,300 $ 4,800 $ 6.200 $ 7,500 $ 8.700 $ 9.800 $10.800 $11.700 negative economic profit, 518 normal profit, 519 positive economic profit, 519 20 Total Cost (TC) $1,000 $2,000 $2,800 $3,500 $4,000 $4,500 $5,200 $6.000 $7.000 $9,000 resources? • Economic profit indicates whether resources will remain in their current activity or be distributed to: different activity. $23-3b • When economic profit is positive, all resources, including the firm's investors and owners, are paid more than they could have expected to get another activity. Others seeing this will redirect th time and investments to that activity. Conversely, when economic profit is negative, all resources are getting paid their opportunity costs. Resource ownery will take their resources and place them into an activity that promises to pay more. $23-3b Q imperfect competition, 515 zero economic profit, 518 2. Use the table in exercise 1 to calculate marginal revenue and marginal cost. 3. Use the information in exercises 1 and 2 to graphically show maximum profit. Label the profit-maximizing quantity and price, total cost, total revenue, and profit. 4. Can accounting profit be positive and economic profit negative? Can accounting profit be negative and eco nomic profit positive? Explain. 5. Use the following information to calculate accounting profit and economic profit; Sales $100 Employee expenses $40 Inventory expenses $20 Value of owner's labor in any other enterprise $40 He MacBook Air
Transcribed Image Text:competitive firm is do differentiated nature of the products offered by the hrm. $23-2a • An oligopoly is a market in which a few firms are producing either differentiated or nondifferentiated products and entry is possible but not easy. $23-2a * The shape of the demand curve facing a firm in an oligopoly depends on how the firms interact. $23-20 • The marginal-revenue curve for all firms except those in perfect competition is downward sloping and lies below the demand curve. The marginal-revenue curve for the perfectly competitive firm is the same as the demand curve, a horizontal or perfectly elastic curve. $23-2b 3. What is the difference between economic profit and accounting profit? • Accountants measure only the direct costs. Economists measure all opportunity costs. $23-3a KEY TERMS accounting profit, 517 economic profit. 517 equity capital, 517 EXERCISES 1. Use the following to calculate profit at each quantity of output (Total) Output (a) 1 2 7 -☀ Price (P) $1,900 $1,700 $1,650 $1,600 $1,550 $1,500 $1,450 $1,400 $1,350 $1.300 Total Revenue (TR) $ 0 $ 1,700 $ 3,300 $ 4,800 $ 6.200 $ 7,500 $ 8.700 $ 9.800 $10.800 $11.700 negative economic profit, 518 normal profit, 519 positive economic profit, 519 20 Total Cost (TC) $1,000 $2,000 $2,800 $3,500 $4,000 $4,500 $5,200 $6.000 $7.000 $9,000 resources? • Economic profit indicates whether resources will remain in their current activity or be distributed to: different activity. $23-3b • When economic profit is positive, all resources, including the firm's investors and owners, are paid more than they could have expected to get another activity. Others seeing this will redirect th time and investments to that activity. Conversely, when economic profit is negative, all resources are getting paid their opportunity costs. Resource ownery will take their resources and place them into an activity that promises to pay more. $23-3b Q imperfect competition, 515 zero economic profit, 518 2. Use the table in exercise 1 to calculate marginal revenue and marginal cost. 3. Use the information in exercises 1 and 2 to graphically show maximum profit. Label the profit-maximizing quantity and price, total cost, total revenue, and profit. 4. Can accounting profit be positive and economic profit negative? Can accounting profit be negative and eco nomic profit positive? Explain. 5. Use the following information to calculate accounting profit and economic profit; Sales $100 Employee expenses $40 Inventory expenses $20 Value of owner's labor in any other enterprise $40 He MacBook Air
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