The accounting profit of a business firm is also called:

The accounting profit of a business firm is also called:
 a. royalty income.
  b. net income from equity.
  c. compensatory income.
  d. windfall gain.
  e. net operating income.

QUESTION 2

When would you expect economic profits in an industry to be zero?
 a. When firms are entering the industry.
 b. When firms are leaving the industry.
 c. When existing firms are growing.
 d. When firms have no incentives to enter or exit.

QUESTION 3

Most textiles worn by American consumers are produced in Asian and South American countries where the opportunity costs of production are lower. This observation refers to the:
 a. law of supply.
  b. income elasticity of demand.
  c. principle of beneficial tariffs.
  d. principle of comparative advantage.
  e. law of decreasing returns to scale.

QUESTION 4

The demand for a commodity is said to perfectly inelastic when:
 a. a prominent change in the price level leaves the quantity demanded totally unchanged.
  b. a small change in the price level affects the quantity demanded to a large extent.
  c. a change in the price level has an equal impact on the quantity demanded.
  d. a change in the price level has a negative impact on the quantity demanded.

QUESTION 5

The characteristic that distinguishes a monopolistically competitive market from a perfectly competitive market is the:
 a. ease of entry.
  b. number of firms operating in the market.
  c. degree of government regulation in the activities of the firms.
  d. differentiation of products.
  e. extent of market share of each firm.

QUESTION 6

Beginning from a long run equilibrium in a competitive industry, if there is a substantial, permanent increase in demand for industry output:
 a. firms will enter the industry, the quantity produced will rise, and prices will end up lower than their initial long run equilibrium level.
  b. firms will enter the industry, the quantity produced will rise, and prices will end up higher than their initial long run equilibrium level.
  c. firms will enter the industry, the quantity produced will rise, and prices will end up at the same level as their initial long run equilibrium level.
  d. firms will enter the industry, the quantity produced will rise, and but without more information, we cannot know if prices will end up higher than their initial long run equilibrium level.