Ch 7 Questions 8

Accounting profit is the difference between

A firms's total revenue and its explicit costs

The difference between a firm's total revenue and its explicit costs is the firm's

Accounting profit

True or false: Economists do not believe that it's important to address poverty and inequality because all that matters is whether the market is efficient.

False

The opportunity costs of all the resources supplied by a firm's owners are the firm's

Implicit costs

The existence of positive economic profit in the long run creates an incentive for:

New firms to enter the market

Any force that prevents firms from entering a new market is called

a barrier to entry

Economic profit is the difference between

a firm's total revenue and the sum of its explicit and implicit costs.

Economic rent is the part of the payment for a factor of production that is _____ the owner's reservation price.

above

Any force that prevents firms from entering a new market is called a ____________ to entry.

barrier

Price controls are often designed to help the poor, but the fact that they reduce total economic surplus means that alternative policies such as direct income transfers to the poor:

could make everyone better off

In general, price subsidies will _____ total economic surplus.

decrease

The rationing function of price is to

distribute scarce goods to those consumers who value them the most highly

The individual pursuit of self-interest _____ with the broader interests of society.

does not always coincide

The difference between a firm's total revenue and the sum of its explicit and implicit costs is the firm's

economic profit

The actual payments a firm makes to its factors of production and other suppliers are its

explicit costs

If the government were to subsidize the price of cars, it's likely that total economic surplus would

fall

If the government were to subsidize the price of cars, it's likely that total economic surplus would _________

fall

When the market is _____, there are no further opportunities for gain available to individuals.

in equilibrium

One reason that firms have a strong incentive to develop cost-saving innovations is that these innovations enable the firm to earn an economic profit

in the short run

One reason that firms have a strong incentive to develop cost-saving innovations is that these innovations enable the firm to earn an economic profit Multiple choice question.

in the short run

When the market is in equilibrium, there are _____ opportunities for gain available to individuals.

no further

The broader interests of society are _____ promoted by the individual pursuit of self-interest.

not always

In the long run, new firms will enter a market if existing firms are earning a

positive economic profit

The role that prices play in distributing scarce goods to those consumers who value them the most highly is known as the

rational function of price

If the total economic surplus from a market is thought of as a pie to be divided among the participants in the market, then imposing price controls will:

reduce the size of the pie

The part of the payment for a factor of production that is greater than the owner's reservation price is called economic _____________

rent

A firms's explicit costs include

the actual payments a firm makes to its factors of production

a firm's implicit costs are

the opportunity costs of the resources supplied by the firm's owners

A firm that adopts a new cost-saving innovation will earn an economic profit in

the short run

Economists believe that

there are important social goals besides economic efficiency