The economy's current rate of interest is 10 percent and a firm has $10,000 of owner-invested capital. Its total revenue is $5000 and the firm's explicit costs are $3500. From this we know that this firm's
A. accounting profit is $1,500.
B. accounting profit is $500.
C. economic profit is $1,500.
D. economic profit is $5,000.
Answer: A
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Suppose an individual firm is comparing two investments, a one year bond from a U.S. firm paying 4% or a one year bond from a German firm which is paying 6%. The current dollars-per-euro rate is 0.75, and the expected rate in one year is 0.78
If the expected rate is correct, which investment will yields a covered interest arbitrage opportunity? A) The U.S. Bond B) The German Bond C) They will have the same return D) This cannot be determined from the information given.
Which of the following is true about the demand for gasoline?
A) It is probably more price elastic in the long run because price will increase by a higher percentage. B) It is probably more price elastic in the long run because it is easier to find substitutes for gasoline in the long run. C) It is probably more price elastic in the short run because price will increase by a higher percentage. D) It is probably more price elastic in the short run because it is easier to find substitutes for gasoline in the short run.
All of the following are mechanisms which reduce the adverse selection problem except ____
a. warranties from established enterprises with non-redeployable assets b. high interest rates c. large collateral requirements d. brand names and product-specific promotions and retail displays e. higher prices in repeat customer transactions
The demand for airline pilots results from the demand for air travel. This fact is an example of:
A. resource substitutability. B. rising marginal resource cost. C. elasticity of resource demand. D. the derived demand for labor.