When a firm incurs negative economic profit,it should:
A)hire more laborers to make the business activity profitable.
B)transfer the resources from current use to other alternative uses.
C)purchase additional raw materials to produce more output.
D)transfer the resources from alternative uses to the current activity.
E)continue to operate with the same resources.

Question

Quizplus · Accepted Answer

When a firm incurs negative economic profit, it means that the revenue generated by the business is not sufficient to cover the total cost of production, including opportunity costs. In such a scenario, it is best for the firm to transfer the resources from the current use to other alternative uses where they can be employed more profitably. This will help the firm to avoid further losses and improve its overall financial position. Hiring more labor or purchasing additional raw materials may lead to a further increase in costs, exacerbating the problem. Continuing with the same resources may not be feasible in the long run, as it will lead to a significant loss.

When a Firm Incurs Negative Economic Profit,it Should