When Total Revenue Minus Total Cost Is Equal to Zero

question 40

Multiple Choice

When total revenue minus total cost is equal to zero, the firm is:

• A) earning above-average economic profit.
• B) earning a normal profit.
• C) losing too much money to stay in business.
• D) earning abnormally low profits.

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Definitions:

Representativeness Heuristic

The representativeness heuristic is a mental shortcut people use to classify something based on how similar it is to a typical case.

Endowment Effect

A cognitive bias that causes individuals to value an owned object higher than it would be valued if it were not owned.

Frame Dependence

Refers to the phenomenon where an individual's decision-making is influenced by the way information is presented, rather than just the information itself.

Law of Small Numbers

A cognitive bias that leads people to draw broad conclusions from small data sets or limited observations.