Theme 3: Profit Flashcards
1
Q
How do you calculate profit?
A
Total revenue - total costs = profit
2
Q
What does total costs include?
A
Opportunity cost
3
Q
What happens if normal profits no longer cover opportunity cost?
A
The firm will leave the market
4
Q
When is a firm getting supernormal profits?
A
TR > TC
5
Q
When is a firm getting normal profits
A
TR = TC
6
Q
When is a firm making a loss
A
TR < TC
7
Q
Show a loss
A
8
Q
Show an increase in revenue
A
(AR1 and MR2 are wrong way around)
9
Q
Show a decrease in revenue
A
10
Q
Show an increase in variable costs
A
11
Q
Show an increase in fixed costs
A
12
Q
Show a short run shut down point (where the firm stays in the market)
A
13
Q
When will a firm stay in the market even if they are making a loss
A
price > AVC
14
Q
What is SR shutdown point
A
AR = AVC
15
Q
What is LR shutdown point
A
AR = ATC
