ECO 108 HW 9 ANSWER KEY

# ECO 108 HW 9 ANSWER KEY - ECO 108 Fall 2010 Bo He Name ID...

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ECO 108 Fall 2010 Bo He Name: __________________________ ID: __________________ Homework 9 ANSWER KEY Due Wednesday Nov.17 th at the Beginning of the Lecture 1.Fred's Bar and Grill hires you to determine the company's status. The data below provides information on the company's annual costs and revenues. (20 pts) Wages \$85,000 Interest paid on loans 7,000 Other expenditures for factors of production 67,000 Total Revenue 250,000 Fred spends at least 40 hours a week at his place of business. If he closed the bar, he could work for his competitor and earn \$30,000 per year. He also owns the building that houses the bar and could rent it out for \$24,000 per year if he closes his business. Calculate the economic cost and economic profit for Fred's Bar and Grill. 2. (a) Suppose the marginal utility of good A is 20 and its price is \$4, and the marginal utility of good B is 50 and its price is \$5. The individual to whom this information applies is spending \$20 on each good. (10 pts) Is he or she maximizing utility? If not, what should the individual do to increase total utility?

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## This note was uploaded on 10/20/2011 for the course ECO 108 taught by Professor Wolman during the Spring '08 term at SUNY Stony Brook.

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ECO 108 HW 9 ANSWER KEY - ECO 108 Fall 2010 Bo He Name ID...

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