Sam quits his job as an airline pilot and opens his own pilot training school. He was earning $40,000 as a pilot. He withdraws $10,000 from his savings where he was earning 6 percent interest and uses the money in his new business. He uses a building he owns as a hanger and could rent it out for $5,000 per year. He rents a computer for $1,200, buys office supplies for $500, rents an airplane for $6,000, pays $1,300 for fuel and maintenance, and hires one worker for $30,000. Sam's total revenue from pilot training classes this year equaled $90,400. Sam's accounting profit this year equals:
A. $45,600.
B. $51,400.
C. $39,000.
D. $44,800.
Answer: B
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In constructing the CPI, the BLS has to deal with commodity substitution bias, which is defined as
A) consumers' substitution of discount stores for full service stores to avoid the higher prices in the full service stores. B) consumers' substitution of cheaper goods for goods whose prices increase. C) the bias from quality changes in existing products that cause prices to increase. D) the bias from new goods being introduced that are more expensive than older goods. E) the bias that arises because the BLS changes the CPI market basket each month.
It is possible for one person to have a comparative advantage in the production of all products?
a. True b. False
If a resource can be put to a single use and has no alternative uses then:
a. economic rents are zero. b. transfer earnings are maximized. c. total earnings are zero. d. all earnings are economic rents. e. all earnings are transfer earnings.
If the government cuts the tax rate, workers get to keep
a. less of each additional dollar they earn, so work effort increases, and aggregate supply shifts right. b. less of each additional dollar they earn, so work effort decreases, and aggregate supply shifts left. c. more of each additional dollar they earn, so work effort increases, and aggregate supply shifts right. d. more of each additional dollar they earn, so work effort decreases, and aggregate supply shifts left.