MICROECONOMICS-CONNECT PLUS ACCESS
21st Edition
ISBN: 9781260430776
Author: McConnell
Publisher: MCG
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Chapter 18, Problem 1P
To determine
Maximum rent paid by the farmer.
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Let us assume that four plots of land is currently used for agriculture which are denoted as A,B,C and D where A is the most productive land while D is the least productive land (marginal land). Suppose that the profit rate of land D is 10%.
a) What the investors of that country are expected to do in that case if the profit rate in industry is 12% according to Ricardo? Will the D continue to be the marginal land in that case?
b) What the investors of that country are expected to do in that case if the profit rate of industry is 8%? Do this lead to a change in what will be the marginal land in that case?
Susan Jones has a job as a pharmacist earning $45,000 per year, and she is deciding whether to take another job as the manager of another pharmacy for $55,000 per year or to purchase a pharmacy that generates revenue of $350,000 per year. To purchase the pharmacy, Susan would have to use her $20,000 savings and borrow another $90,000 at an interest rate of 8% per year.
The pharmacy that Susan is contemplating purchasing has additional expenses of $100,000 for prescription and non-prescription drugs and lines of women’s and men’s personal hygiene products and cosmetics; $45,000 for one full time person; $20,000 for one part time person; $12,000 for rent; $2,500 for electricity; $1,300 for natural gas; $1,200 for telecommunications; and depreciation and amortization expenses are $5,500.
Assume that income and business taxes are 35% and the repayment of the principal of the loan does not start before three years. Also assume that revenue is expected to grow at 5% per year and expenses at…
With current technology, suppose a firm is producing 400 loaves of banana bread daily. Also assume that the least-cost combination of resources in producing those loaves is 5 units of labor, 7 units of land, 2 units of capital, and 1 unit of entrepreneurial ability, selling at prices of $ 40, $60, $60, and $20, respectively. Assume the firm can sell these 400 loaves at $ 2 per unit.
1). What is its total revenue?
2). What is its total cost?
3). What is the firm's profit or loss? The firm generates an economic ( choose one -a) loss, b) profit ) of...?
4). Will it continue to produce banana bread? ( Yes or No)
5). If this firm's situation is typical for the other makers of banana bread, will resources flow toward or away from this bakery good?
Chapter 18 Solutions
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