When a firm is making a normal economic profit... A.) economic profit is equal t

Question

When a firm is making a normal economic profit...

A.) economic profit is equal to zero

B.) economic profit is greater than zero

C.) business profit is zero

D.) business profit is negative

Ceteris paribus, we expect an increase in the advertisement for a consumer good to result in

A.) Increase in the price elasticity of demand for that good

B.) A reduction in the price elasticity of demand for that good

C.) No change in the price elasticity of demand for that good

D.) A reduction in the supply of that good

3.) The cross-price elasticity of the demand for a good with respect to the price of a complementary good is

Explanation / Answer

Question 1

When a firm is making a normal economic profit then this implies that the firm's total revenue is just equal to the sum total of explicit cost and implicit cost.

When this happens, economic profit is said to be zero.

So, when a firm is making normal economic profit then economic profit is equal to zero.

The correct answer is the option (A).

Question 2

Advertisement tends to make the demand for a product less elastic by encouraging brand loyalty.

So, an increase in the advertisement for a consumer good to result in a reduction in the price elasticity of demand for that good.

The correct answer is the option (B).

Question 3

Cross-price elasticity of demand between complementary goods is negative.

So, the cross-price elasticity of the demand for a good with respect to the price of a complementary good is negative.

The correct answer is the option (C).

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