1no:

An economic profit or loss is the difference between the revenue received from the sale of an output
and the opportunity cost of the inputs used. In calculating economic profit, opportunity costs are
deducted from revenues earned.

Accounting profit is a company's total earnings, calculated according to generally accepted

accounting principles (GAAP). It includes the explicit costs of doing business, such as operating
expenses, depreciation, interest and taxes.

While calculating accounting profit, only explicit or book costs, i.e., the cost recoded in the
books of accounts, are considered. The concept of ‘economic profit’ differs from that of
‘accounting profit’. Economic profit takes into account also the implicit or imputed costs. The
implicit cost is opportunity cost. Opportunity cost is defined as the payment that would be
‘necessary to draw forth the factors of production from their most remunerative alternative
employment.

2no:

Accounting costs are the explicit costs, also known hard costs that are seen as money out of your bank
account that you need to run your business. These are production costs, lease payments, marketing budgets
and payroll. In other words, these are the real costs in manufacturing, marketing and delivering your products.
Explicit costs have a monetary value and are easily identified on a bookkeeper's ledger.

Economic costs include the same explicit costs that accounting costs use in calculations, but economic costs
also include implicit costs. Implicit costs are those values that are not listed on the ledger, and they are
assumed by the business to utilize resources. The idea with implicit costs is that the business could make more
by using an asset in a different, more traditional fashion.

Factors that are important for calculating the economic profits of a firm are given below:-

Profit motive

Motivations of managers and workers

Economies of scale
Risk diversification

Barriers to growth of firms

3no:

Reasons for existence of monopoly:

There are several benefits of monopolies to the consumers. That's why we see so many
monopolies still existing in the society.
A. Monopolies provide incentives to innovate. As the monopolies enjoy the power they are
more likely to innovate as all the benefits of innovation are enjoyed by the monopolies. In a
competitive market, companies are reluctant to innovate as innovations by one firm are easily
imitated by the other firms but at a very low cost. Thus, if a firm does not have a property rights
to a new technology, etc. it would worry why create new technology.
 B. Monopolies being the only supplier in the market enjoy high volumes and therefore can easily
enjoy the benefits of economies of the scale.
C. Another benefit of monopoly is that it provides standardization. Since there is just one
supplier, the supplies are standardized.

A monopoly could theoretically earn negative profits in the short run, due to shifting demand .

A monopoly maximizes profit by choosing the quantity where Marginal Revenue (MR) =
Marginal Cost (MC). In the short-run, if this quantity has an Average Total Cost (ATC) greater
than the corresponding price on the demand curve, then the firm would earn negative profit
([Price - Average Total Cost] x Quantity).

4no:

 Long-run equilibrium in perfectly competitive markets meets two important

conditions: allocative efficiency and productive efficiency.

Allocative efficiency means that among the points on the production possibility
frontier, the point that is chosen is socially preferred—at least in a particular and
specific sense.

Productive efficiency means producing without waste so that the choice is on the
production possibility frontier.

 These two conditions have important implications. First, resources are allocated to
their best alternative use. Second, they provide the maximum satisfaction
attainable by society.

5no:
The break-even point is one of the most commonly used concepts of financial analysis, and is not only limited
to economic use, but can also be used by entrepreneurs, accountants, financial planners, managers and even
marketers. Break-even points can be useful to all avenues of a business, as it allows employees to identify
required outputs and work towards meeting these.
The break-even value is not a generic value and will vary dependent on the individual business. Some
businesses may have a higher or lower break-even point, however it is important that each business develop a
break-even point calculation, as this will enable them to see the number of units they need to sell to cover their
variable costs. Each sale will also make a contribution to the payment of fixed costs as well.

6no:

Isocost curve is a producer's budget line while isoquant is his indifference curve.Isoquant is
also called as equal product curve or production indifference curve or constant product
curve. Isoquant indicates various combinations of two factors of production which give the
same level of output per unit of time.