Use the following information to answer the next question. Harvey quit his job at State University where he earned $45,000 a year. He figures his entrepreneurial talent or foregone entrepreneurial income to be $5,000 a year. To start the business, he cashed in $100,000 in bonds that earned 10% interest annually to buy a software company, Extreme Gaming. In the first year, the firm sold 11,000 units of software at $75 each. Of the $75, $55 goes for the costs of production, packaging, marketing, employee wages and benefits, and rent on a building. What is the economic profit generated by Extreme Gaming in the first year?
A. $160,000
B. $280,000
C. $220,000
D. $155,000
Answer: A
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When the exponents of a Cobb-Douglas production function sum to more than 1, the function exhibits
A) constant returns. B) increasing returns. C) decreasing returns. D) either increasing or decreasing returns.
Refer to the above table. If the price of the good produced is $5, the marginal revenue product of the 5th worker is
A) $3350. B) $670. C) $500. D) $100.
It costs firm A $800 to produce five radios and it costs firm B $500 to produce five batteries. If Firm A merges with firm B, it can produce both the five radios and the five batteries for $1500 . The firm has experienced
a. Economies of Scale b. Economies of Scope c. Diseconomies of Scale d. Diseconomies of Scope
What is the difference between the average cost per unit for 5 units and the marginal cost of the 5th unit?
a. 196 b. 86 c. 40 d. 110