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Would a firm earning zero economic profit continue to produce in the long run?
No, a firm earning zero economic profit would not continue to produce in the long run because it would not be covering all its costs, including opportunity costs.
Can opportunity cost be zero?
Opportunity cost can be zero if there are no scarcity in goods and services and resources used to produce such commodities that can lead consumers to make a choice to fulfill their wants
Do you agree or disagree with the following statement when marginal revenue equals marginal cost total cost equals total revenue and the firm makes zero profit?
No it is not true. MC=MR it's "only" the condition of optimization of the firm. This is the condition under which the firm chooses the best quantity to produce given its cost structure. Under this condition you are sure that given that structure the firm maximizes its profits. But this does not implies that the firm is actually making profits(f.e. it could miximize its profits simply making a loss of -21 instead of -22). To be sure of that you have to consider the total cost function. The total cost function is defined as: TC=qxVC+FC than you have to consider the revenue function TR=qxP to see if the firm it's actually making profits you have to calculate TR-TC=Profit note that you can't find the total cost function by the marginal cost function. q=quantity VC=variable cost FC=fixed costs P=price of item sold
At zero production what are variable costs?
At zero production variable cost will be zero because variable cost is the cost occured for producing a product but their will be some fixed cost.
What are the aims of firms?
1) Profit maximisation.The standard assumption made by economist is that firm will seek to maximise their profit that is maximise the gap between the firm's total revenue and total cost (including normal profit.) A firm making the minimum level of normal profit is said to be producing the break even output. Firms will want to make abnormal profit as a reward for managing the resources and taking business risks.2) Sales revenue maximisation A firm may be prepared to accept a lower price and produce above the profit maximising output in order to increase its market share in a growing market. This is a penetration pricing policy.A firm choose to maximise its sales revenue would raise output beyond MC=MR until MR had fallen to zero. Extra sales after this would contribute nothing to total revenue, therefore it is at maximum.
