Your aunt is thinking about opening a hardware store.

She estimates that it

would cost $500,000 per year to rent the location and buy the stock. In
addition, she would have to quit her $50,000 per year job as an accountant. If
your aunt thought she could sell $510,000 worth of merchandise in a year,
what is your aunt’s economic profit? *

–$40,000 ($510,000 - $550,000) $550 = 500k + 50k

$10,000
Option 4
$460,000
A competitor maximizes profit by producing the output that *

equates TR and TC.

maximizes the difference between MR and MC.
equates price and average variable cost.
equates MR and MC
Diminishing returns *

are always associated with declining average product in the short-run

eventually occur in all short-run production situations.
characterize all stages of production
exist in the short run, because as additional units of an input are hired,
output will decrease
With respect to entry and exit, monopolistic competition is *

characterized by free entry and blocked exit.

characterized by easy (though not free) entry and exit.
like pure competition in that entry and exit are free.
like pure monopoly in that entry is blocked
An oligopoly is characterized by *

firms that sell homogeneous product but differentiated.

free entry and blocked exit.
few number of firms and blocked entry.
firms selling identical products but differentiated.