PROBLEMS & EXERCISES


SOLUTIONS & DISCUSSION


UNIT THREE (FOR EXAM 3)


Unit Three: Assignment 4: Problem 4 from page 830

(Note: You may want to review p. 583 and the website presentation for Unit Two, second reading assignment.)


Normal profits are equal to the opportunity cost of making an investment. You must have a normal profit in order to stay in business. Without this profit, the factors of production (i.e., labor, land, capital, and entrepreneurship) would be put to a different use.

Economic profit is any profit above and beyond a normal profit. This is what you are hoping for when you go into business.


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