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- In the stage of increasing returns, there is a. Abundance of variable factors O b. Abundance of fixed factors O c. Improvement in technology O d.Overuse of the fixed factor2. A man is considering investing P500, 000 to open a semi-automatic auto-washingbusiness in a city of 400, 000 population. The equipment can wash, on the average, 12 carsper hour, using two men to operate it and to do small amount of hand work. The man plansto hire two men, in addition to himself, and operate the station on an 8-hour basis, 6 daysper week, 50 weeks per year. He will pay his employees P25. 00 per hour. He expects tocharge P25. 00 for a car wash. Out-of-pocket miscellaneous cost would be P8, 500 permonth.He would pay his employees for 2 weeks for vacations each year. Because of the length ofhis lease, he must write off his investment within 5 years. His capital now is earning 15%,and he is employed at a steady job that pays P25, 000 per month. He desires a rate ofreturn of at least 20% on his investment. Would you recommend the investment?a) Use ROR method b) Use present worth method c) Use future worth method d) Solve for the payback period and the IRRQuestion 2 Lamya has initial investment of SR45, 000. If it were to be invested on stocks, the market interest rate would be 0.12 (12%).However, the industry uses capital and labor as inputs and sells 2, 800 belts per month at SR25 market price. If the cost of the machine that produces the belts is SR 30,000 and labor cost is 20,000. Calculate the following: a. Total revenue. b. Opportunity cost of capital c. Economic profit d. Accounting profit e. From your answer in (c), is the business profitable from the economic profit point of view? Explain your answer. Question 3 The table below gives some data on the population of Crescent Highland. Use the provided information to fill the table. YEARS 1 2 3 4 5 6 7 Population: 16 Years Older or Over (Millions) LabourForce (Millions) Employed (Millions) Unemployed (Millions)…
- 2. A firm learns of an investment opportunity that will increase future revenue, two years from now, by $121 million. The marginal resource cost of the physical capital today is $100 million dollars. Should this firm make this investment at an interest rate of 10%? Why?only typed answer Consider the following information: Q = 16 L + 42 K PL=26, PK=10, P=41 and C=5020 What is the profit maximizing amount of capital?Harvey quit his job at State University, where he earned $62,000 a year. He figures his entrepreneurial talent or forgone entrepreneurial income to be $4,000 a year. To start the business, he cashed in $50,000 in bonds that earned 10 percent interest annually to buy a software company, Extreme Gaming. In the first year, the firm sold 10,000 units of software at $72 for each unit. Of the $72 per unit, $60 goes for the costs of production, packaging, marketing, employee wages and benefits, and rent on a building. The economic profits of Harvey's firm in the first year were
- You are partners with Alice and Mark. You contributed 50% of the capital, Alice contributed 30%, and Mark contributed 20%. (a) How would the annual profits of $100,000 be distributed among all three of you? (b) Using these same numbers, how would an annual loss of $80,000 be distributed between the three of you?Kendall is a successful data analyst working at Amazon. She had one passion for all these years, she loves organizing parties. She decides to quit her job that she was making $150,000 per year, and uses her $200,000 savings, on which she was earning 10 percent annual return, to start her own business. In the first year, she earns revenue of $500,000, and her costs are as follows: Lease $50,000 Utilities $8,000 Wages $32,000 Materials $26,000 Food/Beverage $50,000 a. What is Kendall’s accounting profit? b. What is Kendall’s economic profit?The short run is usually O less than half a year. O one to three years. Otwo to three years. O one year. O four to five years.
- (Maple) The output, Q, of an Internet firm depends in the short term on capital, K, and time, t. The production and savings functions are given by Respectively, where a and b are positive constants. Assuming that capital accumulation is equal to savings, show that If the initial capital is c, solve this equation to obtain an expression for K in terms of t and the constants, a, b and c. Write down the corresponding expression for Q. Comment on the qualitative behaviour of this solution in the case whenIn a perfectly competitive market there is a donut shop that sells 1,200 donuts daily. Each donut sells for the market price of $0.75 and they sell out every day. Assume that this company has labor costs of $275 and materials costs of $400. a. Using only variable costs, what is the donut shop’s daily profit? - Now assume that the owner is thinking of adding a second location downtown. The capital investment required is $4,000. The normal rate of return is 5%. b. If the new shop could operate under the same conditions as the original location is it a good business decision to expand? c. What would be the new shop’s daily profit?Suppose you are considering whether to purchase a house off of Lake Erie for $400,000. You expect thetotal costs of maintaining the property (utilities, repairs, etc.) to equal $15,000/year, and that you would be able togenerate $35,000/year in revenue if you were to put the house on the short term rental market.a. (3) Suppose you are deciding between purchasing the home or whether to invest $400,000 in an interest-bearingaccount. If your objective is to maximize your own net income, what would the interest rate have to equal for youto invest in the interest-bearing account?b. (4) Suppose you decide to buy the house, and now you have to decide whether/when to list the house on theshort term rental market (like Airbnb) or stay in the house yourself. Briefly explain what this decision woulddepend on. What are the implicit (opportunity) costs associated with renting the house to someone else on a givenday? What are the implicit costs associated with the staying in the house yourself?c.…
