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RevQuestEX_2 - Economics 1B Exam#2 Review Questions...

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Economics 1B Short Answer Page 1 Economics 1B Dr. Tom Means Exam #2 Review Questions Fall 2006 Economics 1B Questions 1. Accounting vs. Economic Profits. The President of the University has accused Professor Means of selling scantrons and making "obscene" profits. Professor Means requires a scantron for his exams, which can be purchased at the bookstore for 15 cents. Students can also purchase a scantron from Professor Means on the day of the exam for one dollar. Professor Means (who could be consulting at a rate of $100/hr.) claims that he actually is losing money by providing the scantrons. Investigators are baffled that when questioned, students actually prefer buying a scantron from Professor Means. Is Professor Means reaping "obscene " profits as charged or losing money from the sale of scantrons? Explain, making note of the difference between accounting and economic profits. 2. Cost Schedules. A cell phone company offers monthly service at $5/month.
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