What is the short-run break-even price? What are economic profits at this price? Why would a firm be willing to operate permanently at this price?
What will be an ideal response?
Answer: The short-run break-even price is the price at which total revenue equals total costs, so that economic profits equal zero. The firm is willing to stay in business at zero economic profits because all opportunity costs are covered, including the opportunity costs of the entrepreneur's time and any other resources he or she brings into the firm. The zero economic profits are associated with a normal rate of return, and the entrepreneur cannot expect to do better anywhere else.
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If we use GDP to measure our standard of living, then our procedure is
A) accurate because our standard of living depends solely on goods and services. B) inaccurate because our standard of living only depends on used goods and services. C) inaccurate because our standard of living does not depend only on goods and services. D) inaccurate because our standard of living has nothing to do with goods and services. E) accurate only if we use nominal GDP rather than real GDP.
A graph illustrating the relationship between the quantity of money demanded and the interest rate would have a slope that is:
a. positive. b. negative. c. horizontal. d. vertical.