Which of the Following Is True

question 264

Multiple Choice

Which of the following is true?

• A) Profit as calculated by accountants and economic profit are not necessarily equal.
• B) Profit as calculated by accountants is always smaller than economic profit.
• C) Economic profit ignores implicit costs.
• D) The Internal Revenue Service taxes the firm's economic profit but not its normal profit.
• E) The Internal Revenue Service taxes the firm's normal profit but not its economic profit.

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Definitions:

Purely Competitive

A market scenario where the selling price of products is determined by the overall supply and demand, with numerous sellers and homogeneous products.

Elastic

Describes a condition in economics where the demand or supply for a product is sensitive to changes in price, leading to significant changes in quantity demanded or supplied.

Herfindahl Index

A measure of market concentration, determining the competitiveness of an industry based on the sum of the squares of the market shares of all firms within it.

Product Differentiation

The strategy of distinguishing a product or service from others in the market to make it more attractive to a particular target market.