A normal profit is:
A. the average profitability of a firm over one complete business cycle.
B. calculated by subtracting explicit costs from total revenue.
C. the "price" required to retain entrepreneurial talent in some particular line of production.
D. the amount by which total revenue exceeds total operating costs.
Answer: C
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In which oligopoly model(s) do firms earn zero profit?
A) Cournot B) Bertrand C) Stackelberg D) Oligopoly firms always earn positive economic profits.
The presence of deposit insurance in the savings and loan industry
A) created an adverse selection problem because good S&Ls were forced out of the market. B) solved its own adverse selection problem because it pushed badly managed S&Ls out of the market. C) contributed to "depositor moral hazard" but did not involve a moral hazard problem with owners. D) contributed to "moral hazard by owners" but did not involve a moral hazard problem with depositors. E) contributed to both "depositor moral hazard" and "moral hazard by owners."