Harvey quit his job at State University where he earned $45,000 a year. He figures his
entrepreneurial talent or foregone entrepreneurial income to be $5,000 a year. To start the
business, he cashed in $100,000 in bonds that earned 10 percent interest annually to buy a
software company, Extreme Gaming. In the first year, the firm sold 11,000 units of software
at $75 for each unit. Of the $75 per unit, $55 goes for the costs of production, packaging,
marketing, employee wages and benefits, and rent on a building.Refer to the above
information. The economic profits of Harvey's firm in the first year were:
A.
$155,000
B.
$160,000
C.
$220,000
D.
$280,000 - answer✔$160,000
If a firm's revenues just cover all its opportunity costs, then:
A.
Normal profit is zero
Total revenues equal its implicit costs - answer✔Economic profit is zero
Marginal product of labor refers to the:
A.
Last unit of output produced by labor at the end of each period
B.
Increase in output resulting from employing one more unit of labor
C.
Total output divided by the number of labor employed
D.
Smallest unit of the output produced by labor - answer✔Increase in output resulting from
employing one more unit of labor
28.
Suppose a firm sells its product at a price lower than the opportunity cost of the inputs
used to produce it. Which of the following statements is definitely true?
A.
The firm will earn positive accounting and economic profits
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