![]() A firm will only exit the industry if it is making losses in the long run. A firm making normal profits will remain in the industry. The Normal Profits, also known as a break-even or zero economic profit, includes the profit paid to the entrepreneur (included in total cost, for bringing in scarce resources and taking risk), and total cost is equal to total revenue. What is Normal Profit or Zero Economic Profit? Economic Cost = Explicit Costs + Implicit Costs.Marginal Revenue = Change in total revenue as a result of changing the rate of sales by one unit.Average Revenue = Total Revenue/Quantity.Economic Profit FormulaĮconomic profit is defined as the difference between Total Revenue and Total Economic Cost. Economic profit computations are not normally limited to time periods. Economic profits are based on scarcity so they include explicit costs (for payments to labor, land and capital) and implicit costs (the use of the entrepreneur).
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