3.3.4

Question 1

What’s the condition for profit maximization?

Answer 1

MC = MR

Question 2

What’s the definition of normal profit?

Answer 2

The minimum profit required in order to keep a firm in the industry.

Question 3

What’s super-normal profit?

Answer 3

Anything above of normal profit.

Question 4

What’s subnormal profit?

Answer 4

Anything below normal profit.

Question 5

What does it mean to be in the short-run?

Answer 5

This is when only the variable factors of production can be changed.

Labour and raw materials.

Question 6

What does it mean to be in the long-run?

Answer 6

This is when all factors of production can be changed.

Question 7

When a business is in the short-run, what options do they have

*in terms of shut-down point

Answer 7

If the firm is operating at a loss they can either:

• Cease production
• Shut down the business

Question 8

When a business is in the long-run, what options do they have?

*in terms of shut-down points

Answer 8

If they’re operating at a loss they can either;

• Continue to operate at a loss
• Leave the industry