If the value added of a firm is positive, will the firm necessarily have positive profits?
What will be an ideal response?
No. Value added equals the price of the firm's product minus the cost of intermediate goods. The intermediate goods are converted to the firm's profits by the application of such resources as labor, capital, and entrepreneurship. Profit is the difference between the total sales revenue and the opportunity cost of all the resources used to make the product.
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At a price of $8 per dozen, Chuy sells 40 dozen homemade tamales per week. When he raised his price to $12 per dozen, he still sold 40 dozen per week. Based on this information, the demand for his tamales is
A) unit elastic. B) perfectly elastic. C) perfectly inelastic. D) inelastic.
Everything else held constant, if the tax-exempt status of municipal bonds were eliminated, then
A) the interest rates on municipal bonds would still be less than the interest rate on Treasury bonds. B) the interest rate on municipal bonds would equal the rate on Treasury bonds. C) the interest rate on municipal bonds would exceed the rate on Treasury bonds. D) the interest rates on municipal, Treasury, and corporate bonds would all increase.
The firm in a perfectly competitive industry is a
A) price taker. B) price maker. C) price seeker. D) price dealer.
Rebecca and Leah are roommates. Rebecca likes to study with the music playing loudly and Leah needs quiet when she studies. Rebecca would be willing to pay $5 a night to hear music while Leah would be willing to pay $10 a night for the quiet. In this situation
a. Leah should pay Rebecca $7.50 a night to not listen to music, because that would be a Pareto improvement b. Rebecca should stop listening to music because that would be a Pareto improvement c. There is no action that would create a Pareto improvement d. Rebecca should pay Leah $7.50 a night to listen to music, because that would be a Pareto improvement e. Leah should pay Rebecca $4.50 a night to not listen to music, because that would be a Pareto improvement