Pat used to work as an aerobics instructor at the local gym earning $35,000 a year. Pat quit that job and started working as a personal trainer. Pat makes $50,000 in total annual revenue. Pat's only out-of-pocket costs are $12,000 per year for rent and utilities, $1,000 per year for advertising and $3,000 per year for equipment. Pat's accounting profit is ________, and Pat's economic profit is ________.
A. $50,000; $15,000
B. $15,000; -$1,000
C. $34,000; $15,000
D. $34,000; -$1,000
Answer: D
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Suppose that the money wage in the economy increases by 8 percent. As a result the
A) long-run aggregate supply will decrease. B) long-run and the short-run aggregate supply both decrease. C) short-run aggregate supply will decrease. D) long-run aggregate supply will increase and the short-run aggregate supply will decrease.
When the economy is producing at a quantity greater than its long-run aggregate supply:
A. it is pushing some of its resources to operate beyond capacity. B. the economy is experiencing greater economic growth. C. it causes a bubble to form in one of its major sectors. D. we are experiencing a recession.
Which of the following practices of insurers deter moral hazard?
a. Setting a uniform premium structure. b. Requiring people to purchase the same coverage. c. Arranging for reinsurance to cut the risk of unexpectedly large claims. d. Conducting security checks without notice and terminating the policy whenever required.
The amount of interest owed on a loan of $2,000 after a year at an interest rate of 10 percent is:
A. $200. B. $100. C. $2,200. D. $2,100.