Suppose that you open your own business and earn an accounting profit of $35,000 per year. When you started your business, you left a job that paid you a $30,000 salary annually. Also, suppose that you invested $70,000 of your own funds to start up your business. If the normal rate of return on capital is 10 percent, your economic profit is
A. -$2,000.
B. -$5,000.
C. $5,000.
D. $2,000.
Answer: A
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Expected profit and the real interest rate affect investment decisions
Indicate whether the statement is true or false
Which of the following is not a valid point in debating the merits of increasing government expenditures or cutting taxes during a recession?
a. A cut in the marginal tax rate increases the incentives to find a job and work longer hours. b. Consumers will save a portion of a tax cut. c. The government may use the increase in expenditures on projects with little value, particularly if it wishes to respond quickly. d. There is no evidence that tax cuts have been followed by increases in economic growth.
Hudson Manufacturing is an MNE based in the United States with operations in Asia. The firm is considering expansion into the European Union. Which of the following questions is most relevant to the decision?
A) What is the primary language of most workers? B) Which country has the best production location? C) Which currency has the most favorable value of the euro? D) Which country has the lowest tariffs for manufactured products?
Refer to the data provided in Table 10.1 below to answer the following question(s).
Table 10.1 
Refer to Table 10.1. If the payment to labor per day is $125, this T-shirt manufacturer is maximizing profits if he will hire ________ employees.
A. two B. three C. four D. five