What is the lowest value of economic profit that the firm must earn if it is to keep its resources in the curr

Question

Help me with my Econ HW!

A. Economic profit equal to implicit costs of production

B. Economic profit that is less than zero

C. Zero economic profit

D. Economic profit equal to explicit costs of production

E. Economic profit that is greater than zero

Answer 1

Your question is cut off at "curr."  But I think I get the gist of it.

In the short run, a company will run until marginal profit equals marginal cost, even if that means that the cost ultimately exceeds the profit.

Some costs, say, the mortage on a factory, are sunk in the short term, there's nothing you can do about it.  So it may make sense to continue production even if you're not making money, because your choice is between losing money, or losing even more money.

So your answer, dear, if you're asking the question that I think you are, is A.

Answer 2

Think about the definition of economic profit.  Economic profit is revenue minus both explicit and implicit costs.  Explicit costs are the types of costs for which bills come every month, and implicit costs are the opportunity costs for the capital invested in the firm.  The long run equilibrium (in perfect competition) is zero economic profits.  This means that a firm can earn zero economic profits and keep its resources, so this eliminates choices A, D, and E, since those are all positive numbers.  Now we have to think if a firm can sustain negative economic profits in the short run.  If a firm can meet its explicit costs, it will avoid the repo man and will be able to keep its resources, even if it does not meet its implicit costs.  This means it can have negative economic profits, so the answer is B.

Edit: Judah, I think you're mixing up profit and revenue.