The answer depends on firm’s profit margin (or average profit), which is the relationship between price and average total cost. B) achieve full employment and price level stability. Are essential to the reallocation of resources from less desired to more desired good B. Equalize the distribution of income in the long run C. Are both considered by economist to be a part of production costs D. Have no influence on the composition of domestic output Does maximizing profit (producing where MR = MC) imply an actual economic profit? Most people have strong feelings about these questions. Profits and Losses with the Average Cost Curve. Economic profits and losses: A. are both considered by economists to be a part of production costs. A profit and loss report is based on the calculation of profit (loss). D. equalize the distribution of income in the long run. D. equalize the distribution of income in the long run. 3. Accounting Profit: How to Calculate. D) reallocate resources from less desired to more desired uses. He actually sustains an economic loss of $9,000. Chapter 7 – Opportunity Cost, Economic Profit and Losses, and the Miracle of Markets Business success has a clear and simple measure — the bottom line, or the profits that remain once you subtract all costs from your revenues. Average cost in this example is average total cost (ATC). Economic profits and losses: A. Unfortunately, they lack an understanding of the formation and function of profits and losses in a free market economy. Accounting profit is one of the critical indicators. The profit and loss (P&L) statement is a financial statement that summarizes the revenues, costs, and expenses incurred during a specified period, usually a … Why? C. have no influence on the composition of domestic output. Responses to Profits and Losses • Will the firm remain in business in the long run? 36. Why? Recall from previous lectures that firms use their average cost (AC) to determine profitability. B. are essential to the reallocation of resources from less desired to more desired goods. Economic profits and losses: A. are both considered by economists to be a part of production costs. – If it covers ALL of its costs • Firms that earn normal profit recover only their opportunity cost • Firms that earn positive economic profit recover more than their opportunity cost • Markets in which firms are earning economic Are profits bad? B. are essential to the reallocation of resources from less desired to more desired goods. And if profits are bad, are losses good? Economists like to concentrate on economic profits and losses rather than accounting profits or losses because the economic profits and losses … C. have no influence on the composition of domestic output. Many economic issues concern profit and loss. 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