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Accounting vs Economic Costs
Suppose you work at Jiffy Lube, where you earn $15,000 per year. Your rich Uncle Walter recently died and left you an inheritance, so you are thinking of starting your own business. The business you wish to pursue will convert existing hybrid Toyota Prius automobiles to plug-in hybrid vehicles. You predict that you can retrofit approximately 100 units during the first year at a selling price of $12,000 per automobile upgraded. Your overhead (fixed) costs are estimated at $500,000, and your operating costs (materials, labor, etc.) are expected to be $1,200 per automobile. Note: Show your work and explain your logic for each of the following questions.
a. What are your first year accounting costs?
b. What are your first year economic costs?
c. What are your first year accounting profits (or losses)?
d. What are your first year economic profits (or losses)?
Consider economy that is above full-employment equilibrium (natural rate of output) because of an increase in AD. Prices of productive resources have'nt changed. With the help of graph
You are the manager of College Computers, a manufacturer of customized computers that meet the specifications required by the local university.
What is the share of Household A's income spent on education? Does this household consume more or less education if EF = 20 is provided by the government? What is the share of Household B's income spent on education?
What is your marginal revenue and marginal cost functions? To maximize profits, how much should you produce at plant 1? At plant 2? What is the price that maximizes profits?
Suppose a product sold in a competitive market is subject to a government price control. Suppose the regulated price is less than the free market equilibrium price.
The largo publishing house uses 400 printers and 200 printing presses to produce books. A printer's wage rate is $20, and the price of the printing press is $5,000.
Assume you own a home re-modelling company. You are currently earning short-run profits. The home re-modelling industry is an increasing-cost industry.
To what extent were monetary factors responsible for the recession of 1981 and 1982? Provide a full analysis and be specific. Please site references where appropriate.
You are the manager of a local sporting goods store. Given the reservation prices, determine your optimal bundle pricing strategy.
Suppose the emarginal cost of producing the good in before question is aconstant $ 10 per unit of output . What quantity of output will the firm produce.
For each of the following concepts provide a definition, a complete explanation as to their significance, and a practical example.
Explain what happens to the nation's aggregate supply curve, the short-run equilibrium level of output, and the price level if:
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