Question :
31) A normal profit defined as
A) total revenue minus explicit : 1238753
31) A normal profit is defined as
A) total revenue minus explicit costs.
B) the same thing as accounting profit.
C) the return to entrepreneurship.
D) total revenue minus implicit costs.
E) the economic profit minus the implicit costs.
32) Normal profit is
A) part of the firm’s opportunity costs.
B) the same as economic profits.
C) part of the firm’s explicit costs.
D) Answers A and B are correct.
E) Answers A and C are correct.
33) A normal profit is
A) part of a firm’s opportunity cost.
B) equal to total revenue minus total opportunity cost.
C) the same as economic profit.
D) the same as accounting profit.
E) almost always zero if the company is run efficiently.
34) A firm’s total revenue minus its total opportunity cost is called its
A) accounting profit.
B) normal profit.
C) economic profit.
D) abnormal profit.
E) entrepreneur’s profit.
35) Economic profit equals total revenue minus total
A) explicit costs.
B) opportunity costs.
C) implicit costs.
D) accounting costs.
E) entrepreneur’s costs.
36) Which of the following is true?
A) Profit as calculated by accountants and economic profit are not necessarily equal.
B) Profit as calculated by accountants is always smaller than economic profit.
C) Economic profit ignores implicit costs.
D) The Internal Revenue Service taxes the firm’s economic profit but not its normal profit.
E) The Internal Revenue Service taxes the firm’s normal profit but not its economic profit.
37) April quit her job as an accountant at Ernst and Young, where she was paid $45,000 per year. She started her own landscaping business. She rents machines and tools for $50,000 and pays $10,000 as wages to her help. These are her only costs. April earned total revenue of $100,000.
A) Her accountant calculates her profit as $40,000.
B) She has an economic loss.
C) Her explicit cost is $105,000.
D) Both answers A and B are correct.
E) Both answers A and C are correct.
38) Jennifer owns a pig farm near Salina, Kansas. Last year she earned $39,000 in total revenue while incurring $38,000 in explicit costs. She could have earned $27,000 as a teacher in Salina. These are all her revenue and costs. Therefore Jennifer earned an
A) accounting profit of $1,000 but incurred an economic loss of $26,000.
B) accounting profit of $1,000 but incurred an economic loss of $65,000.
C) accounting profit of $1,000 but incurred an economic loss of $38,000.
D) economic profit of $1,000.
E) None of the above answers is correct.
39) Suppose a firm’s total revenue is $1,000,000. The firm has incurred explicit costs of $750,000. There is also $50,000 of forgone wages by the owner, $10,000 of forgone interest by the owner, $3,000 worth of economic depreciation, and $20,000 worth of normal profit. What is the firm’s economic profit?
A) $250,000
B) $200,000
C) $190,000
D) $167,000
E) $180,000
40) Dr. Khan starts his own dental practice after quitting his $150,000 job at The Mall Dental Clinic. His revenues for the first year are $500,000. He paid $90,000 in rent for the dental office, $60,000 for his office manager’s salary, $24,000 for the dental hygienist, $150,000 for insurance, and $6,000 for other miscellaneous costs. The normal profit from running his business is $20,000.
A) His accounting profit is $350,000.
B) His economic profit is $150,000.
C) His economic profit is zero.
D) His accounting profit is zero.
E) None of the above answers is correct.
