Economics 1B Short Answer Page 1 Economics 1B Dr. Tom Means Exam #2 Review Questions Fall 2006 Economics 1B Questions1. 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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