Question

QUESTION 17 If Ajax a manufacturing firm is earning zero economic profits A. the revenues for Ajax are sufficient to pay explicit costs but not implicit costs B. the owner of Ajax are earning enough to pay their explicit costs only C. the owner of Ajax will not be able to pay himself D. Ajax will shut down in the long run, but will continue to operate in the short run

Answer 1

the company is earning zero economic profits this means the total revenue is equal to total cost with the total cost includes both explicit and implicit costs. the first option is wrong because the revenues are able to pay for both explicit and implicit cost because zero economic profit includes both explicit and implicit costs and the second option is also wrong because it is similar to the first option where both explicit and implicit costs can be paid it will continue to operate in the short run due to zero profit level which means it is earning and accounting profit and even in the long run because it is not earning negative profit did not shutdown

Therefore (a,b,d) are wrong

but the thing that has to be considered here is that because there is no profit he will not be able to pay in which is the profit and that is the reason why

(C) is the answer to this question