Question

Casey operates a stall in a seafood market that is highly competitive. She earns $2,000/day, with a stall hire cost of $100/day. As a result of a positive change in consumer preferences for seafood, Casey experiences a large increase in demand for her seafood Select the item from the list provided to make the following statements true 1. Accounting profit 2. -$2000/year 3. Total cost YCasey's daily accounting profit is YCasey was making an economic loss in this market prior to the change in consumer demand. Fortunately, no new entrants arrive in4. Economic profit the market with the increase in demand for seafood. If Casey manages to now achieve a normal profit in the short run, then Casey 6. A normal profit would definitely be making a /an 5. Economic loss 7. $12000/year 8. $33000/year 9. Explicit cost 10. $45000/year 11. $1900 12. Implicit cost Y The stall hire cost is a / an for Casey

Answer 1

Casey's daily accounting profit = Daily revenue - Daily costs = 2000 - 100 = $1900

The economic profit is possible only when the

revenue is greater than total costs (including opportunity costs) . If the firm is making normal profits in the short run it's total revenue is equal to total costs (including opportunity costs). So, it does not make economic profits. But the total revenue is certainly higher than total accounting costs (excluding opportunity costs). Therefore, the firm makes accounting profits.

The stall hire cost is an explicit cost.