Question

The concept of economic profit is used for making a decision between your two _______ options. Earning zero economic profit is not bad. It means that your two best options make you equally well off so you are indifferent between the two. For example, I am indifferent between teaching microeconomics and macroeconomics because they make me equally well off (I get paid the same).
If economic profit is positive. you should choose the _______ option because it will make you _______ off. If economic profit is negative, you should choose the ________ option because it will make you better off.

Answer 1

Answer:

The concept of economic profit ....... alternative two options.

If economic profit is positive .......... Current option.

If economic profit is negative............ Other option

Explanation:

Economic Profit is the excess of revenue associated with an option, over its costs (explicit external & implicit opportunity costs).

Example : Revenue - Direct explicit cost of production - opportunity cost (like interest on money invested, salary of job left foregone).

The concept is used to make decision between two alternative options. Given, zero economic profits imply indifference.

Positive Economic Profit implies - one should choose Current option, as it will make Better off , having more benefit than other option

Negative Economic Profit implies - one should choose Other option, as it wil make better off, having more benefit than the former considered option.