The phone network says it loses money on local calls, because the $20 average monthly bill does not cover its average cost of $30. It estimates that $18 of costs are directly related to local service, with $12 the share from overall expenses (overhead). Why would the phone network be willing to operate if it is losing money?
What will be an ideal response?
The phone company would save $18 in costs per customer by shutting down but would sacrifice $20 in revenue. Hence, it is better off operating, earning $2 over costs related to local service. Local phone service is actually contributing to profits, since overhead would be unchanged even if local phone service were discontinued.
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What does it mean for two inputs to be complements? Give an example that describes how labor and capital can be complementary inputs
What will be an ideal response?
Figure 2-2
Assume that U.S. agricultural land is used either to raise cattle for beef or to grow wheat. represents the production possibility frontier for beef and wheat. The opportunity cost of moving from point G to point F equals
a.
0.25 million bushels of wheat
b.
1.75 million bushels of wheat
c.
0.125 bushels of wheat
d.
8 bushels of wheat
e.
2 bushels of wheat
Small differences in annual growth rates accumulate into:
A. Small differences in GDP. B. Large differences in GDP. C. A leftward shift of the aggregate demand curve. D. An increase in population.
Among the most difficult costs of crime to evaluate might be the
A. costs of law enforcement activities undertaken because of the crime. B. wages lost due to missed work days following an assault. C. psychological trauma suffered by victims of sexual assault. D. market value of material possessions stolen, damaged, or destroyed.