Distinguish between the economist's definition of profit and the accountant's definition. Which is superior for decision making?
Accounting profit is revenue minus actual, out-of-pocket costs. Economic profit is revenue minus total costs, including the opportunity cost of all factors. Accounting profit typically is greater than economic profit. Although more difficult to compute, economic profit is superior because it incorporates the concept of opportunity cost of resources, including capital and the owner's forgone earnings.
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If a currency union provides more to its members than a common currency unit, such as fiscal transfers or fiscal federalism, it would make joining that union:
A) less costly. B) more beneficial. C) yield higher net benefits. D) less costly, more beneficial, and yield higher net benefits.
Monopolistic competition is defined as a type of market structure in which
A) many firms produce the good. B) firms produce a homogeneous good. C) there are barriers to entry. D) firms can make an economic profit in the long run. E) firms can easily enter the market but cannot easily exit from it.