Judge the following statements Economic profit will be alw

Judge the following statements: ( ) Economic profit will be always less than accounting profit. ( ) Changes in people´s income generate changes in the quantity demanded at certain level of prices, which means changes along the demand curve. ( ) A tax on a good or service creates the same deadweight loss for every good, regardless of the demand elasticity of those goods. ( ) In the long run, unlike monopolies, firms under monopolistic competition or perfect competition have zero profits. ( ) The trend we have seen in past years of people switching from SUV cars to more fuel-efficient or hybrid cars, even electric cars, is an example of how in the long run the demand for gas becomes more elastic than in the short run. A. TFFFF B. TFFTT C. FTTFT D. TFFTF

Solution

The correct option is (B)

1) Economic profit is always less than accounting profit. T

2) Changes in people income generate changes in the quantity demanded along the demand curve.F as there will be shift in demand curve ,not along the demand curve.

3) A tax on a good or service creates the same deadweight loss for every good,regardless of the demand elasticity.F as elastic demand may generate lasrger tax revenue and smaller deadweight loss.

4)In the long run,unlike monopolies,firms under monopolistic and perfect competition have zero profits.T becasue of free entry and exit

5)The trend in switching from SUV to fuel efficient or hybrid cars is an example of in the long run demand for gas has become more elastic. T because of elastic demand,any change in price will cause demand to change by a greater percentage and people will switch to the alternatives such as electric and fuel efficient cars.