Mods 3.4-3.5: Types of Profit & Profit Maximization

Which of the following is an example of an implicit cost of going out for lunch?

• the tip you leave

• the total charge on your credit card

• the cost of gas to drive to the restaurant

• the movie you missed in order to go to lunch

• the bonding with your friends at lunch

Which of the following costs is considered when calculating economic profit but not accounting profit?

• Wages

• Electricity

• Office supplies

• Potential earnings from another job

• Taxes

A firm earns a zero profit when its

• accounting profit equals 0

• accounting profit equals its economic profit

• total revenue equals its total costs

• economic profit is positive

• economic profit equals its total explicit and implicit costs

Earning an economic profit of zero is

• a sign that the firm should shut down

• less desirable to a firm than earning an accounting profit of zero

• acceptable during a recession but otherwise not

• equivalent to earning an accounting profit of zero if implicit costs exist

• acceptable because the firm could make no better alternative use of its resources

Marginal revenue is:

• the revenue received from sales

• the additional cost of producing an additional unit of output

• the change in total revenue created by the sale of one more unit of output

• the marginal benefit provided by an additional unit of output

• always increasing as more output is sold

Adherence to the principle of marginal analysis entails continuing activities until the

• total benefit exceeds the marginal benefit

• total benefit equals the total cost

• total benefit exceeds the total cost

• marginal benefit equals the marginal cost

• marginal benefit exceeds the marginal cost