Answer to Question #52913 in Microeconomics for Yana

Question

1. An economist left her BAM 100,000 - a - year teaching position to work full - time in her own consulting business. In the first year, she had total revenue of BAM 200,000 and business expenses of BAM 100,000. She made a(n):
a. economic profit.
b. economic loss.
c. implicit profit.
d. accounting loss but not an economic loss.
e. zero economic profit.

2. Which of the following statements is true ?
a. Economic profit equals accounting profit minus implicit costs.
b. The short run is any period of time in which there is at least one fixed input.
c. A fixed input is any resource for which the quantity cannot change during the period under
consideration.
d. In the long run there are no fixed costs.
e. All of these.

Answer 1

1. An economist left her BAM 100,000 - a - year teaching position to work full - time in her own consulting business. In the first year, she had total revenue of BAM 200,000 and business expenses of BAM 100,000. She made a zero economic profit, because if we include implicit costs of 100,000 salary of a teacher, then economic profit = 200,000 - 100,000 - 100,000 = 0.
So, the right answer is:
e. zero economic profit.
2. All statements are true, so the right answer is:
e. All of these.