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Class_8_worksheet - Economics 101 P Conway Fall 2011...

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Economics 101 P. Conway, Fall 2011 In-class worksheet, Class 8 1. The Law of supply: if the price of a good increases , the quantity supplied of that good to the market will rise. The price of natural gas has risen in real terms in the last five years. At the same time, we’ve seen a large expansion in the use of “hydro- fracturing” technology in drilling natural-gas wells. How is this related to the law of supply? Because the price of gas has risen, oil suppliers want to increase their supply so they have turned to hydro-fracturing. Before, the price was not high enough for an expansion in the use of hydro-fracturing to be profitable. 2. Profit is the total revenue a firm receives from the sale of its product minus all costs, explicit and implicit , incurred in producing it. Paul is the owner and manager of an auto body shop. His revenues exceed his monetary costs in each year, but one day he closed the business and walked away. Why might he do this? Relate it to our concept of profit.
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