EBK INTERMEDIATE MICROECONOMICS AND ITS
EBK INTERMEDIATE MICROECONOMICS AND ITS
12th Edition
ISBN: 9781305176386
Author: Snyder
Publisher: YUZU
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Chapter 8, Problem 1RQ
To determine

State some reasons for any firm to be concerned about its economic profits, and also about the opportunity costs the people earning for investing in the firm.

Expert Solution & Answer
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Answer to Problem 1RQ

The accounting profits allow the firms to pay for their taxes and dividends from their surpluses, on the other hand, the economic profits imply that firm is able to utilize the resources available in a proper and optimum manner.

Explanation of Solution

While the profits from accounting determine the taxes and dividends, the economic profits imply that the factors employed in the firm are properly utilized in production.

This means that when the factors employed are not properly utilized in the production process the company automatically experiences deterioration in its economic profits, and thereby affecting its production capabilities.

Economics Concept Introduction

Introduction: According to the utility maximization concept, it is assumed that the consumer decides to spend each and every penny of his available income on the products that he believes yields the maximum marginal utility.

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