You have two career options. You can work for someone else for $50,000 a year, or, you can run your own business, with an annual revenue of $100,000, and explicit costs of $40,000 annually
Explain which career option a profit-maximizer would select and why.
In the absence of other implicit costs a profit-maximizer will run their own business. The business owner will receive $100,000 - $40,000 = $60,000. The opportunity cost is only $50,000.
You might also like to view...
Refer to the table above. If Bob earns $105,000 per annum, he has to pay a tax of approximately ________
A) $6,400 B) $12,600 C) $18,675 D) $19,600
If the demand for a good increased, what would be the effect on the equilibrium price and quantity?
What will be an ideal response?
Consider a firm operating with the following: price = 10; MR = 10; MC = 10; ATC = 10. This firm is:
A. making an economic profit of 10. B. an example of monopolistic competition. C. perfectly competitive in long-run equilibrium. D. a monopolist for a product with a relatively inelastic demand.
Susie buys two goods: rounds of golf and massages. Suppose that the price of a round of golf is $20 and the price of a massage is $30. In a typical week, Susie will play two rounds of golf, getting 20 units of satisfaction from the second round. She
normally buys three massages each week, with the third giving her 30 units of satisfaction. If she were to buy a fourth massage in a week, it would give her 20 units of satisfaction. If the price of massages is reduced to $15, which of the following outcomes might we expect to occur? A. Susie would leave her consumption choices unchanged because of diminishing marginal utility in the consumption of massages. B. Susie would buy more massages and fewer rounds of golf, as predicted by the income effect. C. Susie would buy more massages and more rounds of golf, as predicted by the substitution effect. D. Susie would buy more massages and fewer rounds of golf, as predicted by the substitution effect.