Explicit Costs = Worker wages + pets and supplies to sell + annual rent Explicit Costs = 92,000 = 35,000 + 42,000 + 15,000 Implicit Costs = Foregone interest income + foregone wages + foregone entrep. Income Implicit Costs = 47,000 = 7,000 + 32,000 + 8,000 Accounting Profit = Total Revenue – Total Explicit Costs Accounting Profit = 45,000 = 137,000 – 92,000 Economic Profit = Total Revenue – (Total Explicit Cost + Total Implicit Cost) Economic Profit (Loss) = (2,000) = 137,000 – (92,000 + 47,000) With the information above, if this business operates in either a purely competitive or monopolistically competitive market, where firms can easily enter and exit the market, what would we expect to occur in the market and to this business in the long run.
Explicit Costs = Worker wages + pets and supplies to sell + annual rent
Explicit Costs = 92,000 = 35,000 + 42,000 + 15,000
Implicit Costs = Foregone interest income + foregone wages + foregone entrep. Income
Implicit Costs = 47,000 = 7,000 + 32,000 + 8,000
Accounting Profit = Total Revenue – Total Explicit Costs
Accounting Profit = 45,000 = 137,000 – 92,000
Economic Profit = Total Revenue – (Total Explicit Cost + Total Implicit Cost)
Economic
With the information above, if this business operates in either a purely
In perfect competition, in long run there is zero economic profit.
Same is the case with the monopolistically competitive market.
That is , in long run in monopolistically competitive market, the firm makes zero economic profit.
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