During a year of operation, a firm collects $450,000 in revenue and spends $100,000 on labor expense, raw materials, rent, and utilities. The firm's owner has provided $750,000 of her own money form her personal portfolio instead of investing the money and earning a 10% annual rate of return. The firm also operates out of a building they own worth $1,000,000 which the owner inherited 25 years ago.
1.The explicit costs of the firm are $______________.
2. If the owner could earn 15% annually on the money she has invested in the firm, the economic profit of the firm would be ______________ (when revenue is $450,000).
3. The implicit costs are $______________.
4. The firm's accounting profit is $______________.
5. The firm earns an economic profit of $______________.
Answer:
1. 100,000
2. 237,500
3. 75,000
4. 350,000
5. 275,000
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One drawback of deferred payments is that
A) employees may shirk anyway. B) employers might fire high achievers to avoid paying higher wages or bonuses. C) it is difficult to determine who are the good and who are the bad workers. D) employees have to work for the firm for a long time.
Which one of the following is TRUE?
A. Transaction deposits are counted in M2 but are not included in M1. B. Balances in money market deposit accounts are counted in M1 but are not included in M2. C. Most of the U.S. currency in existence circulates outside U.S. borders. D. Traveler's checks are not considered to be money because they are not valid unless signed.
The possibility that changes in the value of a nation's currency will result in variations in the market value of a business's assets is referred to as
A. conversion risk. B. foreign exchange risk. C. hedge risk. D. transaction risk.
The condition for profit-maximization for competitive firms and monopolies is the same: marginal revenue equals marginal cost. Hence, monopolies are efficient.
Answer the following statement true (T) or false (F)