William quits his job where he earns an annual salary of $75,000 and opens a management consulting business, charging an hourly rate of $120 . He works out of his home, converting a storeroom into an office. (Zoning restrictions prevent William from renting out the room.) Start-up costs are financed by selling $15,000 worth of bonds he inherited that were earning annual interest payments of $900
. During his first year, William incurs expenses for supplies and utilities that total $3,500 . If William bills 500 hours of consulting time in the first year, he earns an economic profit equal to
a. $55,600
b. -$15,000
c. -$19,400
d. -$34,400
e. $41,500
C
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The techniques of optimization in levels and optimization in differences:
A) cannot be used to compare the same set of alternatives. B) provide identical answers when comparing the same set of alternatives. C) may provide different answers when comparing the same set of alternatives. D) compare only the costs and ignore the benefits of the alternatives.
If you want a say in the management of a corporation, you should buy
A) common stock. B) preferred stock. C) bonds. D) either bonds or preferred stock.
Price discrimination is related to elasticity because:
A. the firm can increase revenues by charging customers with elastic demands higher prices and charging customers with inelastic demands lower prices. B. the firm can increase revenues by charging customers with elastic demands lower prices and charging customers with inelastic demands higher prices. C. the firm can increase revenues by charging all customers higher prices. D. None of these; elasticity and price discrimination are unrelated.
Answer the following questions true (T) or false (F)
1. Developing countries with large informal sectors tend to have firms that invest less in capital equipment. 2. If income is unequally distributed in an economy, increases in GDP may not raise well-being in an economy. 3. Real GDP per capita is calculated by dividing the value of real GDP for a country by the country's adult population.