Business Goals and Competition

What is the primary aim/goal of businesses?

• To maximize profits

• To eliminate competition

• To increase prices

• To lower quality of products

What is competition?

• Striving against others to reach an objective

• The government attempts to maintain competition in the market to ensure low prices and high quality of products

• Antitrust laws are in place to stop monopoly power

• All of the above

What is the main objective of a firm that sells its goods or services for a profit?

• To minimize its costs

• To maximize its profit

• To increase its inputs

• To reduce its revenue

What are the resources used in production (land, labour, capital, and entrepreneurship) called?

• Outputs

• Products

• Inputs

• Services

How do businesses use production?

• To create entertainment

• To process and transform economic resources into goods and/or services with economic value

• To reduce economic resources

• To increase leisure time

What is the formula for Total Profit?

• Total Profit = Total Revenue + Total Costs

• Total Profit = Total Revenue - Total Costs

• Total Profit = Total Costs - Total Revenue

• Total Profit = Total Revenue x Total Costs

What are explicit costs?

• Costs that appear on a business’s accounting statements, such as payment for material, machines, rent, utilities, and taxes.

• Costs not included among expenses on the income statement of a business.

• Costs related to the depreciation of assets.

• Costs associated with employee salaries.

What are implicit costs?

• Costs that appear on a business’s accounting statements.

• Costs not included among expenses on the income statement of a business, such as the amount of owner's time spent devoted to his or her business and the money invested in the business that could have earned interest if invested somewhere else.

• Costs related to the purchase of raw materials.

• Costs associated with marketing and advertising.

How is accounting profit calculated?

• Total Revenue - Explicit Costs

• Total Revenue - Implicit Costs

• Total Revenue - (Explicit Costs + Implicit Costs)

• Total Revenue - Operating Costs

How is economic profit calculated?

• Total Revenue - Explicit Costs

• Total Revenue - Implicit Costs

• Total Revenue - (Explicit Costs + Implicit Costs)

• Total Revenue - Operating Costs