1) Explain why economic profit provides a better measure of profit than accounting profit. 2) Explain what occurs when a new technology makes another...

1) Explain why economic profit provides a better

measure of profit than accounting profit.

2) Explain what occurs when a new technology makes

another one obsolete in terms of economic profit.

Consider firm A to be an existing firm using the old

technology. Firm B is the new firm with the new

technology. Firm A earned positive profits for

years, but with the entrance of Firm B, Firm A’s

goods and services are no longer desired.

3) It is often stated that free cash flow is the same as

economic profit. Define free cash flow.

Demonstrate whether it is or is not the same as

economic profit.