Accountants do not often report economic profits on income statements and balance sheets because:
a. economic profits are exactly the same as accounting profits, and thus they do not need to be broken out in financial statements.
b. the cost of capital, while easy to measure, is very difficult to report.
c. it might make some firms look as though they possessed an unfair competitive advantage over other firms.
d. the cost of equity capital is very difficult to measure, and opportunity costs vary from investor to investor.
e. the concept of economic profit is not firmly established in economic theory.
QUESTION 2In an increasing cost industry, an unexpected decrease in demand would lead to ____ costs and a ____ price in the long run?
a. higher; higher.
b. higher; lower.
c. lower; lower.
d. lower; higher.
QUESTION 3A country benefits from trade if it is able to obtain a good from a foreign country:
a. that has a very low domestic demand.
b. the production of which requires a steady supply of unskilled labor.
c. by giving up less of other goods than it would have to give up to obtain the good at home.
d. by giving up more of other goods than it would have to give up to obtain the good at home.
e. that has a substantial number of substitutes in the domestic market.
QUESTION 4A Commodity X will be considered as a normal good if:
a. the quantity of the good consumed decreases with an increase in income.
b. the quantity of the good consumed increases with an increase in income.
c. the quantity of the good consumed increases in the same proportion as the increase in income.
d. the quantity of the good consumed reflects no change with a change in income.
QUESTION 5The equity capital of a privately owned firm includes:
a. the owner's own dollars put into the firm.
b. the cost of raw materials.
c. the cost of labor resource used in production.
d. economic rent only.
e. the value added at each stage of production.
QUESTION 6If the gadget industry is a constant cost industry, one would expect that the long run result of an increase in demand for gadget to include ____ firms and a(n) ____ in price.
a. more; increase.
b. more; no change.
c. more; decrease.
d. fewer; increase.
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