What is normal profit? How is it different from accounting profit?
If the difference between the total revenue of a firm and its implicit costs is equal to zero, the firm is said to be earning zero profit or a normal profit. Normal profit includes all the implicit costs as well as the explicit costs of production, while accounting profit includes only the explicit costs.
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If the central bank expands the money supply under floating exchange rates, it potentially stimulates the economy in two ways, namely:
A) by raising the price level and by increased competition. B) by lowering the rate of interest and by causing a depreciation of the currency. C) by creating higher spending and by increasing the budget deficit. D) by increasing worker productivity and creating R&D incentives for firms.
With positive externalities, _____
a. the market equilibrium occurs at a greater quantity than the socially optimal output b. net social welfare is maximized c. the social benefit curve lies above the private benefit curve d. there is no deadweight loss