What is the difference between a normal profit and an economic profit?
What will be an ideal response?
A normal profit is the return to entrepreneurship and is part of the opportunity cost of operating a business. An economic profit is the difference between the firm's total revenue and its total opportunity cost. Because the normal profit is part of the firm's opportunity cost, an economic profit is a profit above and beyond a normal profit. If the firm earns an economic profit, the entrepreneur running the firm receives the normal profit plus the economic profit.
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When competing power blocs exist within an oligopolistic industry,
a. concentration ratios are low b. the laissez-faire approach can be justified c. prices are higher than under monopoly d. nationalization is necessary e. contestable markets exist by definition
According to traditional Keynesian analysis, fiscal policy operates by
A. directly affecting aggregate demand. B. indirectly affecting aggregate demand through its effect on the money supply. C. directly affecting aggregate supply. D. informing business people about its plans for the economy so they will know how to adjust their behavior.