A Firm Has Explicit Costs of $110,000 and Total Revenue

question 106

Multiple Choice

A firm has explicit costs of $110,000 and total revenue of $120,000. Which of the following is true about the firm?

• A) The firm might be making an economic profit but we need more information about implicit costs to know for sure.
• B) The firm is incurring an economic loss if implicit costs are $10,000.
• C) The firm is definitely making an economic profit because it must be minimising its opportunity cost.
• D) The firm is making a normal profit if implicit costs are $0.
• E) The firm may be making an economic profit but only if implicit costs are negative.

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Definitions:

Antitrust Laws

Legislation passed to prevent monopolies or unfair business practices that limit competition and harm consumers.

Market Share

The portion of a market controlled by a particular company, measured by the volume or value of its sales compared to the total market.

Four-firm Concentration Ratio

The Four-firm Concentration Ratio measures the market share of the four largest firms within an industry, indicating the level of competition or market concentration.

Herfindahl Index

A measure of market concentration that squares the market share of each firm within an industry to estimate the industry's competitive landscape.