Sally quit her job as an auto mechanic earning $50,000 per year to start her own business. To save money she operates her business out of a small building she owns which, until she started her own business, she had rented out for $10,000 per year. She
also invested her $20,000 savings (which earned a market interest rate of 5% per year) in her business. You are given the following information about the first year of her operations.
Total revenue $120,000
Cost of labor 40,000
Cost of materials 15,000
Equipment rental 5,000
a. Calculate her economic costs for the first year.
b. Calculate her accounting costs for the first year.
c. Calculate her implicit costs for the first year.
d. Sally tells you that she would really like to move to a location closer to town but she decided against it because "right now I don't pay any rent and it will cost me $10,000 a year to rent near town." Do you agree with her reasoning?
a. $121,000 = 40,000 (labor) + 15,000 (materials) + 5,000 (equipment)+ 10,000 (opportunity cost of building) + 1,000 (5% of 20,000, the opportunity cost of her savings) + 50,000 (opportunity cost of Sally's labor)
b. $60,000 = 40,000 (labor) + 15,000 (materials) + 5,000 (equipment)
c. $61,000 = 10,000 (opportunity cost of building) + 1,000 (5% of 20,000, the opportunity cost of her savings) + 50,000 (opportunity cost of Sally's labor)
d. No. Although she does not incur a monetary cost for her garage space now, it is an opportunity cost and part of the economic cost of doing business. Sally could just as well rent her space out now, collect the rent and move closer to town.
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Who wrote the book Progress and Poverty, in which the author argued that the payment of rent to landlords serves no economic purpose?
a. George Akerlof. b. Robert Dorfman. c. Henry George. d. Friedrich A. Hayek.
According to the figure shown, Starbucks:
This figure displays the choices being made by two coffee shops: Starbucks and Dunkin Donuts. Both companies are trying to decide whether or not to expand in an area. The area can handle only one of them expanding, and whoever expands will cause the other to lose some business. If they both expand, the market will be saturated, and neither company will do well. The payoffs are the additional profits (or losses) they will earn.
A. has a dominant strategy to expand.
B. has a dominant strategy not to expand.
C. has first-mover advantage.
D. should wait to see what Dunkin Donuts is going to do.
Assume the role of a defender of advertising. Describe the characteristics of advertising that enhance the effectiveness of markets and increase the social welfare of society
Discuss the unequal burden of unemployment for different demographic groups in the United States.
What will be an ideal response?