Hi Tutor

If accounting profits are positive and economic profits are negative in the long run, the proper strategy is to...

1. monitor the situation closely and leave the business the minute accounting profits start to decline
2. feel satisfied because, in the long run, accounting profits will average zero
3. go back and recalculate figures, because accounting profits can never be more than economic profits
4. close down the business and shift the resources to more profitable ventures

and then, which of the following is not true of state-owned and managed monopolies?

1. the state is better able to price MC because it can use its taxing power to cover the losses that result from marginal cost pricing
2. X inefficiency is common because incentives for profits are missing
3. bureaucrats frequently maximise the operating budgets of their departments rather than function with a profit maximisation objective
4. an intellegent government will set price equal to average total cost, so that losses will not have to be borne by the taxpayer