TUTORIAL 8 - TUTORIAL 8 WEEK 9 PROFIT AND THE INVISIBLE...

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TUTORIAL 8 WEEK 9 PROFIT AND THE INVISIBLE HAND Assignment 2 Students will undertake a written assignment in class. This assignment will last 30 minutes and will be worth 10 percent of the total marks awarded for this course. Each tutorial will be given a prescribed topic chosen from group of topics which will appear on the web in the week before the assignment. Reading Text: Ch. 9 Ch 9 Review Questions: 1, 2, 3 and 4 1 If the owner of a business supplies valuable resources to the firm, he may earn an extremely large accounting profit yet still earn zero economic profit. In this case, $1 million per year would be a normal profit, implying that the firm’s revenues are just sufficient to cover all implicit and explicit costs, including a return on any capital that the owner has invested that is equal to the return it would earn in its best alternative use. 2 True. Earning a normal profit shows that a firm could do no better by redeploying the resources supplied by the owners of the firm from their current use to their next best alternative use. 3 Economic profit attracts entry to an industry, increasing supply, driving down the price and eliminating economic profit. Economic rent, however, is a return on inputs that can not be easily duplicated. No similar process affects the return to factors of production that are not easily duplicated. 4
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This note was uploaded on 12/31/2011 for the course ECON 1101 taught by Professor Julia during the Three '08 term at University of New South Wales.

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TUTORIAL 8 - TUTORIAL 8 WEEK 9 PROFIT AND THE INVISIBLE...

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