What Can You Say About Economic Profit And The Rate Of Return Essay

951 WordsAug 25, 20164 Pages
Chapter 11 problems 1, 4,5 1. What can you say about economic profit (and the rate of return) in the night-club business? The accounting profit of midnight hour was $100K. Basically, 1M earns 10% return of 100K. The economic profit of Midnight hour would show a 200K decrease on the accounting profits, if the investment was earned at 20%. You have to take into account the opportunity costs. 4. Explain why. Explain why even higher support prices would not help honey farmers in the long run. Normally if you are not making a profit then you are probably just breaking even. If the total revenue equals the total costs it is breaking even. The honey farmers costs maybe higher than the big size companies but the midium size companies may still be low enough to break even at the market price. 5. Would higher or lower rates increase the incomes of agents? Explain, distinguish between the short run and the long run. No, The incomes would off set each other over the long run. Higher rates will get people to find cheaper rates, where as, cheaper rates will bring people to the agents. In the short run higher rates will increase income but in the long run the income will decrease as people will go where the cheaper policies are. In the short run the income will decrease, but in the long run the income will increase due to more people flocking to the

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