MANAGERIAL ECONOMICS 20162017 - MANAGERIAL ECONOMICS...

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MANAGERIAL ECONOMICS – ECO3105 Assignment 1 (20%) Question 1 During a year of operation, a firm collects $450,000 in revenue and spends $100,000 on labor expense, raw materials, rent, and utilities. The firm's owner has provided $750,000 of her own money instead of investing the money and earning a 10% annual rate of return. a. The explicit opportunity costs of using market-supplied resources are ______________. The implicit opportunity costs of using owner-supplied resources are ______________. Total economic cost is ______________. b. The firm earns economic profit of ______________. c. The firm's accounting profit is ______________. d. If the owner could earn 15% annually on the money she has invested in the firm, the economic profit of the firm would be ______________ (when revenue is $450,000). Question 2 Suppose that the demand and supply functions for good X are a. Equilibrium price is ___________ and equilibrium quantity is __________ units. b. If price is $8, then a ______________ of _______ units occurs. If price is $12, then a _____________ of _________ units occurs. c. Let the demand function change to Q d = 80 - 6 P . Given the ORIGINAL supply function, the equilibrium price is ___________ and equilibrium quantity is __________ units.

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