Business Economics Essay

688 Words Apr 20th, 2008 3 Pages
Chapter One
Technical Problem 2
a) Implicit Costs: Opportunity cost = $500,000 x 14% = $70,000
Explicit Costs: What is paid for products/services = $80,000
Total Economic Costs: Implicit Costs + Explicit Costs = $70,000 + $80,000 = $150,000
b) Economic Profit: Total Revenues – Total Economic Cost = $175,000 - $150,000 = $25,000
c) Accounting Profit: Total Revenues – Explicit Costs = $175,000 - $80,000 = $95,000
d) New Implicit Costs = $500,000 x 20% = $100,000
Economic Profit: $175,000 – ($100,000 + $80,000) = $ (5,000)

Chapter Two
Technical Problem 1

Qd = 600 – 4PA – 0.03M – 12PB + 15F + 6Pe + 1.5N

a) The intercept parameter: The amount of the good consumers would demand if the price was zero = 600 units
b) The slope
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f) Quantity demanded of good A when PA = $5, M = $25,000, PB = $40, F = 6.5, Pe = $5.25, and N = 2,000.
Qd = 600 – 4($5) – 0.03($25,000) – 12($40) + 15(6.5) + 6($5.25) + 1.5(2,000)
= 600 – 20 – 750 – 480 + 97.5 + 31.5 + 3,000
Qd = 2,479 units

Applied Problem 1 How would the following events affect the price you receive for a bottle of wine?
a) The price of comparable French wine decreases. Decrease.
b) One hundred new wineries open in California. Decrease.
c) The unemployment rate in the US decreases. Increase.
d) The price of cheese increases. Increase.
e) The price of a glass bottle increases significantly due to new government antishatter regulations. Increase.
f) Researchers discover a new wine-making technology that reduces production costs. Decrease.
g) The price of wine vinegar, which is made from the leftover grape mash, increases. Increase.
h) The average age of consumers increases, and older people drink less wine. Decrease.

Applied Problem 2 What are your predictions for the following?
a) A major freeze destroys a large number of the orange trees in Flroida.
The price of oranges will increase. The supply of oranges will decrease.

b) The scientists in the agricultural extension service of the University of Florida discover a way to double the number of

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