Economic profit affects
A) the allocation of resources but not the level of resource use.
B) the level of resource use but not the allocation of resources.
C) the allocation of resources and the level of resource use.
D) neither the allocation of resources nor the level of resource use.

Question

Quizplus · Accepted Answer

Economic profit affects the allocation of resources by directing them towards more profitable ventures and away from less profitable ones. It also affects the level of resource use as firms may increase or decrease their use of resources to maximize their economic profit. Therefore, both the allocation and level of resource use are affected by economic profit.

Economic Profit Affects