1) Class, is it possible for a business to show an accounting profit, but actually earn an economic loss? Why or why not? Give an example.
2) Example :
the profit maximization rule is that a firm should produce at the level of output corresponding to the equality of marginal revenue and marginal cost. Marginal revenue is the change in total revenue due to a one-unit change in output. Marginal cost is the change in total revenue due to a one-unit change in output. We can write this rule as MR = MC.
2) QUESTION: Class, what if MR does not equal MC? Why does that necessarily mean that profit is not being maximized? Explain.
3) Class, what are some other important barriers to entry? What are more examples of oligopolies? What do we mean by industry concentration?