Problem 1
Linda sells 100 bottles of homemade ketchup for \(\$ 10\) each. The cost of the ingredients, the bottles, and the labels was \(\$ 700 .\) In addition, it took her 20 hours to make the ketchup and to do so she took time off from a job that paid her \(\$ 20\) per hour. Linda's accounting profit is ______ while her economic profit is _____. a. \(\$ 700 ; \$ 400\) b. \(\$ 300 ; \$ 100\) c. \(\$ 300 ;\) negative \(\$ 100\) d. \(\$ 1,000 ;\) negative \(\$ 1,100\)
Problem 2
Which of the following are short-run and which are long-run adjustments? a. Wendy's builds a new restaurant. b. Harley-Davidson Corporation hires 200 more production workers. c. A farmer increases the amount of fertilizer used on his corn crop. d. An Alcoa aluminum plant adds a third shift of workers.
Problem 4
Indicate how each of the following would shift the (1) marginalcost curve, (2) average-variable-cost curve, (3) average-fixed-cost curve, and (4) average- total-cost curve of a manufacturing firm. In each case specify the direction of the shift. a. A reduction in business property taxes. b. An increase in the nominal wages of production workers. c. A decrease in the price of electricity. d. An increase in insurance rates on plant and equipment. e. An increase in transportation costs.
