Principles of Microeconomics, California Edition
2nd Edition
ISBN: 9780393622102
Author: Dirk Mateer, Lee Coppock
Publisher: NORTON
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Question
Chapter 8, Problem 2QR
To determine
Describe the reason why the economic profit is a better measure of profitability than accounting profit.
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Tim is thinking of opening a garment store. He estimates that it would cost $270000 per
year to rent the location and buy the merchandise. In addition, he would have to quit his
$63000 per year day job. Tim estimates he can sell $315600 worth of garments in a year.
a. What will be the accounting profit and economic profit for Tim?
b. If you are an economist, should you suggest opening the store? Why?
What is meant by normal profit?
Thanks for replying fast, what is the difference between normal profit and super normal profit?
Chapter 8 Solutions
Principles of Microeconomics, California Edition
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Similar questions
- Can economic profit ever exceed accounting profit? Explain.arrow_forwardWhy do a firm's profit disappear in the long run?arrow_forwardWhy 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?arrow_forward
- How do you calculate whether your business has an economic profit using marginal approach to profit maximization? and what does an economic profit means?arrow_forwardWHY SOME FIRMS MIGHT BE ABLE TO CONTINUE TO MAKE AN ACONOMIC PROFIT IN THE LONG RUN?arrow_forwardWhat is the meaning of economic profit. Support your answer by example?arrow_forward
- In order to maximize the profit, what decision do you think is the most important one? Can business making zero economic profit, but still keep running? And why? Please provide a business example to explain the concept 'diminishing marginal return'.arrow_forwardFamily 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_forwardSmall “Mom and Pop firms,” like inner city grocery stores, sometimes exist even though they do not earn economic profits. How can you explain this?arrow_forward
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