Explain the difference between accounting profit and economic profit. Include discussion of the distinction between explicit and implicit costs and how they relate to economic cost and opportunity cost. [5 marks]
(ii). Suppose your aunt is thinking about opening a hardware store. She estimates that it would cost $ 500,000 per year to rent the store and buy the stock. In addition, she would have to quit her $ 510,000 per year job as an accountant.
What is your aunts opportunity cost of running a hardware store for a year? If your aunt thought she could sell $ 510,000 worth of merchandise in a year, should she open the store? Explain.
(iii). Compare and contrast the two market structures: Perfect Competition and Monopoly, in line with main characteristics of them. Comment of the Price and profit maximising output level in the two structures. [5 marks]
(iv). Which market structure is considered to be more efficient? Justify your answer [3 marks]
(v). List down two closest real world examples for each of these market structures. [2 marks]
(vi). Do you believe that the government should intervene to control the monopoly power in the market. You need to argue for/justify your answer. [5 marks]
(vii). In a free market system, why does the government have to provide certain goods and services using tax payers money? Is there any justification? Explain providing examples.