Microeconomics Assignment -2

Running head: Microeconomics
Microeconomics
Name of the Student
Name of the University
Student ID

Microeconomics1
Table of Contents
Answer 2..........................................................................................................................................2
Answer 3..........................................................................................................................................3
Answer 6..........................................................................................................................................4
Answer 7..........................................................................................................................................7
Reference List..................................................................................................................................8

Microeconomics2
Answer 2
(a) In business there are three kinds of profit namely, accounting profit, economic profit and
normal profit. For a business, it is important to consider each of the profit in order to sustain in
the industry (Andreeva & Diakonova, 2016). Each of the aforementioned profit is different from
each other signifies different aspect of business. The accounting profit is the total sum of profit
which can be calculated by subtracting explicit cost of a firm from its total revenue. The explicit
cost of a firm means the direct cost or the cost that is accrued during the production. On the other
hand, implicit cost is the amount of cost that a firm accrued due to foregoing a possible profitable
venture in order to do invest in the existing production venture. Thus, it is an indirect cost for a
firm. Now, if a firm subtract this implicit cost and the explicit cost from the total revenue of the
firm then the value calculated is the economic profit of the firm (Ermacora, 2018). Additionally,
the normal profit of the firm is the amount of profit which is necessary for a firm to sustain in the
market. Normal profit is also known as zero economic profit because at this level of profit a firm
just covers its total cost of production.
(b)
(i) The consumption of emu meat has increased in the market due to some reason but the cost of
emu meat production has not increased. Thus, as per the demand and supply theory of
microeconomics it can be inferred that the price of the emu meat will increase. Hence, at this
point the firms will increase the production of emu meat to meet the market demand and earn
more profit (Becker, 2017). Therefore, with corresponding rise in supply the price of emu meat
will decline at reach the previous price level. Thus, with same price and cost of production the