Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN: 9781305506725
Author: James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher: Cengage Learning
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Chapter 3, Problem 11CQ
To determine
The actions taken by an entrepreneur to earn profit and its effects on the value of resources and the effect of loss associated with a firm.
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What happens to the value of resources when losses are present? If a firm making losses goes out of business, is this bad? Why or why not?
Why do economists believe that economic profit is the more accurate measure of a business success? Why is economic profit the superior method of determining a business success?
How does a firm decide whether to stay in business if it is earning a loss? Discuss in detail.
Chapter 3 Solutions
Economics: Private and Public Choice (MindTap Course List)
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- Why is it reasonable to think of normal profit as a type of cost to the firm?arrow_forwardI was wondering what the answer to this problem in Krugman´s microeconomics book is: A benefit maximizer company has an economic loss of 10.000$ per year. Its fixed cost is 15.000$ per year. In the short term, should they keep producing or should the close the business? In the long run, should they stay in business? And if the company had a fixed cost of 6.000$ per year, should they stay in business in the long and short run? Thank you!arrow_forwardThe 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 falsearrow_forward
- Many firms in the United States file for bankruptcy every year, yet they still continue operating. Why would they do this instead of completely shutting down?arrow_forwardWhy are abnormal profits of a firm difficult to sustain?arrow_forward“Even if a firm is losing money, it may be better to stay in business in the short run.” Is this statement ever true? Under what condition(s)?arrow_forward
- Family Mart like inner city grocery stores, sometimes exist even though they do not earn economic profits. How can you explain this? It is clear that businesses operate in the short run, but do they ever operate in the long run? Discuss. What are the different type of costs incurred in the short run and in the long run?arrow_forwardWhy can't firms enter the market in the short-run?arrow_forwardExplain what it means in terms of opportunity cost when Economic profits are positive?arrow_forward
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