When is the profit a firm earns equal to the producer surplus? Explain
What will be an ideal response?
Profit equals producer surplus when the firm has no fixed costs. Producer surplus can be thought of as the gains from trade. In the short run, if the firm produces any output, it earns profit equal to revenue minus variable costs minus fixed costs. If the firm shuts down, it loses the fixed costs. The producer surplus equals the profit from trading minus the profit or loss from not trading, revenue minus variable costs. If no fixed costs exist, then profit will equal the producer surplus.
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According to the text, economic decision making refers to:
A) comparing costs and benefits. B) rejecting wish-driven strategies. C) ensuring that wants and needs are matched. D) analyzing demand and supply. E) forecasting.
At very low levels of disposable income,
A. consumption is greater than disposable income. B. disposable income is greater than consumption. C. people save most of their incomes. D. consumption is negative.