Question

1) Anna currently owns and maintains a building. She spends $1,300 each day to hire the security and maintenance crew. She also pays $700 each day to rent the surveillance equipment for the building. The renters at her building pay her $2,800 of rent each day. If she doesn't own and maintain the building, she can work as a photographer instead. If she works as a photographer, she expects to earn $200 each day. In this case, what is Anna's accounting profit?

2) Choose a market for a good that you use often in real life and explain whether the market is perfect competition, monopoly, monopolistic competition, or oligopoly using the definition of the four different market structures. Answer with explanation

Answer 1

The ease of entry and exit also means that new stores can open and compete in the market. Finally, stores may have some pricing power since they can differentiate themselves through product quality, design, or branding.

1) Anna's accounting profitAnna’s accounting profit is the difference between the revenues she receives and the costs she incurs. In this case, she incurs a cost of $2000 per day ($1,300/day for security and maintenance crew + $700/day for rent of surveillance equipment). Anna’s daily revenue is $2,800/day from renters if she maintains and owns the building. So, her accounting profit is the difference between the revenue of $2,800/day and the cost of $2000/day, or $800/day. If Anna works as a photographer, she expects to earn $200/day. Her revenue would be $200/day, and the cost would be $0 since she wouldn't have to pay for maintenance, security, and rent. Therefore, her accounting profit would be $200/day.

2) Market structure is the organizational and other characteristics of a market that determines the nature of competition and pricing power of firms. There are four types of market structures: perfect competition, monopoly, monopolistic competition, and oligopoly. Perfect competition is characterized by many firms, homogeneous products, easy entry and exit, and price-taking behavior. Monopoly is characterized by only one firm, no close substitutes, high barriers to entry, and price-making behavior.

To know more about market visit: