Neoclassical Economics: Origins and Principles
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Questions and Answers

What is the main difference between economic profit and normal profit?

  • Economic profit is the profit earned in the short run, while normal profit is earned in the long run.
  • Normal profit is the minimum profit required to stay in business, while economic profit is the excess. (correct)
  • Economic profit is the profit needed to stay in business, while normal profit is the excess profit.
  • Normal profit is the profit earned in the short run, while economic profit is earned in the long run.

    • What is the main characteristic of a neoclassical firm?

  • It is a single-product firm with a single objective of profit maximization. (correct)
  • It has a complex and changing environment.
  • It ignores the internal organization and has perfect information.
  • It has multiple objectives, including growth and manager's utility.

    • According to New Institutional Economics, what is the conception of the firm?

  • A firm with no role for the entrepreneur and no internal organization.
  • A unit of decision-making with perfect information and rationality.
  • A multi-product firm with multiple objectives and bounded rationality. (correct)
  • A passive responder to market signals with no internal organization.

    • What is the main difference between a neoclassical firm and a real business firm?

    <p>A neoclassical firm ignores the internal organization, while a real business firm considers it important.</p> Signup and view all the answers

    What is the paradox of profits in a competitive market?

    <p>Firms can earn no economic profit in the long run.</p> Signup and view all the answers

    What is the main objective of a real business firm?

    <p>Growth and manager's utility.</p> Signup and view all the answers

    What is the origin of New Institutional Economics?

    <p>It originated in the 50's-60's with the works of Ronald Coase.</p> Signup and view all the answers

    What is the characteristics of a real business firm in terms of information?

    <p>It has bounded rationality.</p> Signup and view all the answers

    What is the main difference between a neoclassical firm and a real business firm in terms of the environment?

    <p>A neoclassical firm has a stable environment, while a real business firm has a complex and changing environment.</p> Signup and view all the answers

    What is the role of the entrepreneur in a real business firm?

    <p>The entrepreneur has an important role.</p> Signup and view all the answers

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