Refer to Scenario 9.5 below to answer the question(s) that follow. SCENARIO 9.5: Investors put up $520,000 to construct a building and purchase all equipment for a new restaurant. The investors expect to earn a minimum return of 10 percent on their investment. The restaurant is open 52 weeks per year and serves 900 meals per week. The fixed costs are spread over the 52 weeks (i.e. prorated weekly). Included in the fixed costs is the 10% return to the investors and $1,000 per week in other fixed costs. Variable costs include $1,000 in weekly wages and $600 per week for materials, electricity, etc. The restaurant charges $3 on average per meal. Refer to Scenario 9.5. In the long run, the restaurant will want to
A. operate but not expand.
B. go out of business.
C. operate and expand.
D. shut down but not go out of business.
Answer: B
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Answer the following statement(s) true (T) or false (F)
1. Of two baskets with identical standard deviations, a risk-averse person will prefer the basket with the higher expected value. 2. A stock that is guaranteed to increase in value is risk-free. 3. By definition, a risk preferring person will gamble no matter what the odds. 4. A risk neutral person earning $30,000 per year would likely be willing to pay a year's worth of income for a 50-50 chance at winning $70,000. 5. A risk neutral individual has indifference curves that are identical to the iso-expected lines of a fair gamble.
In the short run, when the Fed decreases the quantity of money
A) bond prices fall and the interest rate rises. B) bond prices rise and the interest rate falls. C) the demand for money increases. D) the supply of money curve shifts rightward.
The single-price monopolist shown in the above figure could increase its economic profit if
A) it became a price discriminator. B) its costs of production decreased. C) the demand for its good increased. D) any or all the above were to occur.
For a monopolist, at the profit-maximizing level of output:
A. price is greater than marginal revenue. B. marginal revenue is greater than average revenue. C. average revenue is greater than price. D. price is equal to marginal revenue.