Economics For Today
10th Edition
ISBN: 9781337613040
Author: Tucker
Publisher: Cengage Learning
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Question
Chapter 7, Problem 7SQ
To determine
The impact of the decision to leave the teaching job and going for consulting business.
Expert Solution & Answer
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a. Give 2 examples of explicit cost
b. Give 2 examples of implicit cost/opportunity cost/cost of ownership/cost of equity capital
c. Imagine yourself as an entrepreneur. Pick any business you like. Run some numbers to calculate your accounting profit and economic profit. Show your numbers. Note: Make up those numbers yourself.
d. After you have run the numbers, do you still want to start the business? Why or why not?
Distinguish between explicit and implicit costs, giving examples of each. What are some explicit and implicit costs of attending college? Why does the economist classify normal profit as a cost? Is economic profit a cost of production?
(Scenario: Accounting and Economic Profit) Use Scenario: Accounting and Economic Profit. What is the opportunity cost of Wang's $100,000 inheritance being used to start his business?Scenario: Accounting and Economic ProfitRather than put the $100,000 that his grandmother left him in a mutual fund that earns 5% each year, Tommy Wang quit his job, which paid $60,000 per year, and started Wang's Wicker Furniture Store. He rented a showroom for $20,000 for the year, purchased $60,000 in wicker furniture, and incurred costs of $40,000 for sales help and advertising. In his first year, his revenue was $150,000.
Chapter 7 Solutions
Economics For Today
Ch. 7.5 - Prob. 1YTECh. 7 - Prob. 1SQPCh. 7 - Prob. 2SQPCh. 7 - Prob. 3SQPCh. 7 - Prob. 4SQPCh. 7 - Prob. 5SQPCh. 7 - Prob. 6SQPCh. 7 - Prob. 7SQPCh. 7 - Prob. 8SQPCh. 7 - Prob. 9SQP
Ch. 7 - Prob. 10SQPCh. 7 - Prob. 11SQPCh. 7 - Prob. 1SQCh. 7 - Prob. 2SQCh. 7 - Prob. 3SQCh. 7 - Prob. 4SQCh. 7 - Prob. 5SQCh. 7 - Prob. 6SQCh. 7 - Prob. 7SQCh. 7 - Prob. 8SQCh. 7 - Prob. 9SQCh. 7 - Prob. 10SQCh. 7 - Prob. 11SQCh. 7 - Prob. 12SQCh. 7 - Prob. 13SQCh. 7 - Prob. 14SQCh. 7 - Prob. 15SQCh. 7 - Prob. 16SQCh. 7 - Prob. 17SQCh. 7 - Prob. 18SQCh. 7 - Prob. 19SQCh. 7 - Prob. 20SQCh. 7 - Prob. 21SQCh. 7 - Prob. 22SQCh. 7 - Prob. 23SQCh. 7 - Prob. 24SQCh. 7 - Prob. 25SQ
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- An economist left her $100,000-a-year teachingposition to work full-time in her own consultingbusiness. In the first year, she had total revenueof $200,000 and business expenses of $150,000.She made ana. implicit profit.b. economic loss.c. economic profit.d. accounting loss but not an economic loss.arrow_forwardDistinguish between explicit and implicit costs, giving examples of each. Why does the economist classify normal profit as a cost? Is economic profit a cost of production? Explain why or why not.arrow_forward6. The price for the effort and energy of the entrepreneur used in production is part of the _____. a. Real cost b. Nominal cost c. Opportunity cost d. Explicit costsarrow_forward
- Gloria decided to open her own business and earns $50,000 in accounting profit the first year. When deciding to open her own business, she turned down three separate job offers with annual salaries of $50,000, $60,000, and $70,000. What is Gloria's economic profit from running her own business? Question 5 options: a) -$75,000 b) -$20,000 c) $20,000 d) none of the abovearrow_forward1. Factors that increase productivity and explain each 2. Explain what is Short run and Long run Period by giving an example. 3. Describe common productivity killers and then find strategies to help eradicate the specific problems 4. What is Production Function? 5. What is Marginal Product? 6. Diminishing Marginal Product? 7. What are cost? 8. Explain total revenue, total cost, profit with a given example 9. Differentiate explicit and implicit costs 10. Differentiate Economic profit from accounting profit and example scenario 11. Why is Productivity important in economics? Give an example scenario 12. Describe Productivity in Economics. Give and example scenario 13. Using the economic definition of productivity can help us to determine how productive we really are. Explain it’s impact on wages, Role of technology and Relationships with consumption.arrow_forwardQ)Distinguish between explicit and implicit costs, giving examples of each. (a) What are the explicit and implicit costs, say for example for joining university study? (b) Why does the economist classify normal profits as a cost? (c) Are economic profits a cost of production?arrow_forward
- Discuss the impact of long run on cost of doing business.arrow_forwardBonnie decides to open a company and earns JD50,000 in accounting profit the first year. When deciding to open the company, she took JD20,000 from her savings, which earned 5 percent interest. She also turned down three separate job offers with annual salaries of JD30,000, JD40,000, and $JD45,000. What is Bonnie's economic profit from opening her own company?arrow_forward3. Understanding the least-cost rule Alex runs a surfing school on the North Shore of Oahu. He has two inputs: surfboards, which he rents from a local shop for $10 per day, and surfing instructors, whom he hires for $50 per day. Alex has figured out that the marginal physical product (MPP) of the last instructor hired is 15 lessons, and the MPP of the last board used is 2 lessons. Which of the following statements is correct? a. Alex could lower his costs without reducing his output if he employed fewer instructors and used more surfboards. b. Any of these answers may be right, depending on the price of a lesson. c. Alex currently employs a cost-minimizing combination of surfboards and instructors. d. Alex could lower his costs without reducing his output if he employed more instructors and used fewer surfboards.arrow_forward
- Farmer McDonald gives banjo lessons for $20 an hour. One day, he spends10 hours planting $100 worth of seeds on his farm. What opportunity cost has he incurred?What cost would his accountant measure? If these seeds yield $200 worth of crops, doesMcDonald earn an accounting profit? Does he earn an economic profit?arrow_forwardSmall Mom and Pop firms, like inner city grocery stores, sometimes exist even though they do not earn economic profits. How can you explain this?arrow_forwardA common name for fixed cost is overhead. If you divide fixed cost by the quantity of output produced, you get average fixed cost. Supposed fixed cost is 1,000. What does the average fixed cost curve look like? Use your response to explain what spreading the overhead means.arrow_forward
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