Assginment 2.docx - Assignment 2 Chapter 3&4 Group 6...

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Assignment 2 Chapter 3&4 Group 6: Hongtao Sun, Junxia Lin, Lin Li, Yu Yu, Yuan Zhang 1. Normal profit is best described as: 1. zero economic profit. 2. total revenue minus all explicit costs. 3. the sum of accounting profit plus economic profit. the correct answer is 1. When the accounting profit just covered implicit opportunity cost, this is normal profit. Therefore, economic profit is zero. If there is economic profit in the market, it should be abnormal profit. 2. A firm supplying a commodity product in the marketplace is most likely to receive economic rent if: 1. demand increases for the commodity and supply is elastic. 2. demand increases for the commodity and supply is inelastic. 3. supply increases for the commodity and demand is inelastic. The correct answer is 2. Because economic rent is high profit attributed to a fined, limited supply. When the demand increases, but supply is fixed, in this case, the price of commodity will increase and also increased in potential for economic rent. 3. Entrepreneurs are most likely to receive payment or compensation in the form of: 1. rent. 2. profit . 3. wages. The correct answer is profit. After entrepreneurs make contribution to the economic process, they will get return, this return is profit. 4. The marketing director for a Swiss specialty equipment manufacturer estimates the firm can sell 200 units and earn total revenue of CHF500,000. However, if 250 units are sold, revenue will total CHF600,000. The marginal revenue per unit associated with marketing 250 units instead of 200 units is closest to: 1. CHF2,000 . 2. CHF2,400. 3. CHF2,500. The correct answer is CHF2,000.
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Marginal revenue = ∆ total revenue / ∆ Quantity ∆ total revenue = 600,000 – 500,000 = 100,000 ∆ Quantity = 250 – 200 = 50 MR = 100,000/ 50= 2000 5. An agricultural firm operating in a perfectly competitive market supplies wheat to manufacturers of consumer food products and animal feeds. If the firm were able to expand its production and unit sales by 10 percent, the most likely result would be: 1. a 10 percent increase in total revenue. 2. a 10 percent increase in average revenue. 3. an increase in total revenue of less than 10 percent. The correct answer is 1. This firm is in a perfectly competitive market supplies, when this firm expand its production and unit sales, it will not affect market price. Therefore, when this firm increase their unit sales, the revenue also will proportionately increase. 6. An operator of a ski resort is considering offering price reductions on weekday ski passes. At the normal price of 50 Euros per day, 300 customers are expected to buy passes each weekday. At a discounted price of 40 Euros per day, 450 customers are expected to buy passes each weekday. The marginal revenue per customer earned from offering the discounted price is closest to: 1. 20 Euros. 2. 40 Euros. 3. 50 Euros.
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