Normal profit occurs when

Question

BlackTom AI · Accepted Answer

Question restatement: Normal profit occurs when the firm’s situation is such that economic profit is zero, i.e., total revenues just cover all costs including opportunity costs.
Option a: 'the firm makes zero economic profit.' This aligns with the standard economic theory of normal profit, which is the point at which all explicit costs and implicit costs (opportunity costs) are covered, leaving no extra profit. It represents the break-even condition in economic terms.
Option b: 'the firm's revenues are less than the explicit costs and implicit costs.' If revenues are less than both explicit and implicit costs, the firm incurs a positive economic loss, not normal profit. This describes an unprofitable situation rather than normal profit.
Option c: 'the firm's revenues are the same as its explicit costs.' If revenues equal only explicit costs, but not implicit costs, economic profit would be negative because opportunity costs are not covered. Normal profit requires both explicit and implicit costs to be covered, so this is not correct.
Option d: 'the firm's revenues are greater than the explicit costs and implicit costs.' If revenues exceed both explicit and implicit costs, economic profit is positive, not zero. This describes profit in excess of normal profit, not normal profit.
In summary, option a accurately captures the concept of normal profit as zero economic profit, while options b, c, and d describe scenarios with losses, incomplete coverage of opportunity costs, or excess profit, respectively. The distinctions hinge on whether implicit costs (opportunity costs) are fully covered and whether economic profit is zero or not.

Normal profit occurs when

View Explanation

Log in for full answers

Similar Questions

A monopolist must obtain a minimum of a(n) profit in the long run, or it will go out of business.

The table below provides cost and revenue information for a firm producing hand-made cups. At what level of output does the firm earn normal profit?

The table below provides cost and revenue information for a firm producing hand-made cups. At what level of output does the firm earn normal profit?

In the diagram below, a firm is operating in an imperfect marketThe firm will only make normal profits in the long-run when

In the diagram below, a firm is operating in an imperfect marketThe firm will only make normal profits in the long-run when

The level of profit that occurs when total revenue is equal to total cost is defined as:

75. Normal profit is A. determined by subtracting implicit costs from total revenue. B. determined by subtracting explicit costs from total revenue. C. the return to the entrepreneur when economic profits are zero. D. the average profitability of an industry over the preceding 10 years.

More Practical Tools for Students Powered by AI Study Helper

Homework AI Solver

Stylized AI Paper Writer

Plagiarism Checker Assistant

Citation AI Academic Writing Tool

In-Class Translation Assistant

AI Note Generator

AI Quiz Answers

Past Exam Questions from University Test Bank

Smart Practice Assistant

Adaptive Practice

Making Your Study Simpler