Question

score A student in a principles of economics course makes the following remark "The economic model of perfectly competitive markets is fine in theory but not very reas predicts that in the long run, a firm in a perfectly competitive market will eam no profits. No firm in the real world would stay in business if it earned zero profits Is this remark correct or incorrect? Iscore O A The remarks incorrect because the students confused accounting profit and economic profit Firms in a perfectly competitive market eam economic profit but no accounting proft 3. The remark is incorrect because the student has comused accounting profe and economic prot e in perfectly contpestive marketeam accounting profit, but no economic pront OC The remark is correct

Answer 1

0:41. This yeusk_is_meilt B. The narkism incorrect because the student has i cenfused accounting profitand economic profil finans_in_a bestcotcembettinc macket carm accounting profit' but no_economic profit M This is because vaccounting profit : Total Recoul – ExplictCests. whereas Ecomemic Profit - Total Revenue - Explicit cest - Inblicet So, as vesel_ecmemic profit includes the deduction of implicit Cost that is cost which does not involve any payment of money but considered and opportunity cost The implicit costs are positive in the long run which makes economic profit zero in the long run, wheruas accounting profit is positive live the accounting forefit is mark than economic ifrofit in the_long_culina So, the firm could earn prost in the long I run that are accounting profits ned with CamScanner

Date 1) Why might a menofoly cruise ? E all of the above M This is because monopoly Qulle because of these reasons O Barier to entry by government regulahen - Il government block entry by regulating of granting a public franchie_than_ there will only be one firm present in the market who act as sole sellex of the goods Natural Monof oly: If the seller can supply the entire market at lower marginal cost than can tur for more firm it gives rise to a natural monopoly and he only supply products in the market. 2 Ownership of a key resource of the seller or only couple of firms control access to key raw materials necessary to produce a good then there will be no other form who had access to it which gives use to a monopoly. There exists no fossibility for network externalities with other forms because the frims in the monopoly market as earning higher brofits which keep their net work reserved CS$canned with CamScanner