Purchase Solution

Normal Profits: Business, Society and Government

Not what you're looking for?

Ask Custom Question

I am having some problems understanding this section of Economics

1. Suppose the Disney Company was experiencing above-normal profits. What would you predict would happen over time?

2. Explain why a proposed merger between Staples and Office Max was not allowed by the Department of Justice?

3. Smokers impose negative externalities on nonsmokers. Suppose the airspace in a restaurant is a resource owned by the restaurant owner.

a. How ould the owner respond to the negative externality caused by smokers?

b. Suppose smokers own the airspace. How would that change matters?

c. If the government gives ownership of the air to nonsmokers, would that change matters?

d. What does a ban on smoking in the restaurant do?

Purchase this Solution
Solution Summary

The solution is detailed and explains the concepts very well. The solution is very easy to understand as well. All the steps are clearly shown which makes it very easy for anyone to follow. Overall, an excellent response to the question being asked.

Solution Preview

1. If Disney company is experiencing above normal profits, then other people would see that. Other people would want in on the action and so they would also start businesses similar to Disney's. It will take time to establish the brand name that Disney enjoys but eventually there will be competitors to Disney. When that happens Disney's profits will erode and it will end up earning 0 economic profits. New entrants will keep on entering the industry until everyone earns no economic profits. ...

Purchase this Solution
Free BrainMass Quizzes
Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

View More Free Quizzes
Related BrainMass Solutions

  • Macroeconomics: Supply and Demand

    Supernormal profits are profits in excess of normal profits. The small business owner may or not get paid should he make normal profits. It depends too much on the conditions and psychology of the particular entrepreneur.

  • Milton Friedman Goal of the Firm

    The government plays an even more active role in business through taxation, regulation, and monitoring of activities.

  • The confliction on firm's social responsibilities

    Therefore, even when the companies are taking the social responsibility, which comes, outside the normal business goal of creating profits, the firms are actually creating more value and profits.

  • Political and economic freedom

    When profits are made, they are given to the government which then distributes them in whatever manner society has decided is fair. The means of production in a capitalist system are owned by private parties.

  • Unemployment

    This will further lead to decline in profits for the business. Small business unit may be closed and there might be retrenchment of big business houses. This will further increase unemployment in the society.

  • Government & Business Relations in the US

    The government helps the corporation in earning profits and keeps aside the motive of protecting the health and safety of the society.

  • Peter Drucker on the Society of Organizations

    Individuals, organizations and the government often have divergent and conflicting views about what their responsibilities are in order to make society better off.

  • Social Responsibility Significance in Business

    In 1970 Milton Friedman said that the Social Responsibility of Business was to increase its profits.

  • Adam Smith tax maxims - profit and non profit entities

    Can you find some middle ground in this debate that would show that both business people and those who work for non-profit organizations contribute to society and need to work together more closely to help people?

View More Related Solutions