2012 Multiple Choice (Basic)

2012 Multiple Choice (Basic)

(PPC, Comparative Advantage, Supply & Demand)

Can't happen,, but I like Chuck Norris.

Answer  - (C) amount that must be given up, 

(sacrificed, foregone, lost, given-up)

Answer  - (E) increasing opportunity costs

Basic Cheat Sheet here.

Answer  - (A)

Understand that a Country can have absolute advantage in production of a good and have comparative advantage in the good.

A country can have absolute advantage in both goods,

but a country can only have a comparative advantage in one good.

I guess there can also be no comparative advantage.

Comparative advantage cheat sheet here. (I'm finding this sheet isn't working for me)

Answer  - (A) - 5000

Economic Profit (includes implicit costs)

Implicit costs are the costs to the firm of paying the entrepreneur to stay in this business,,, in essence,, the entrepreneur must make enough of a return on his investment to stay in this line of business.

Sally could have had a salary of $25,000 and rented her building for $10,000 - these are costs

Her accounting costs were $125,000 and the $35,000 (foregone salary and rent) = $160,000

Profit = TR - TC

Sally's total costs  = 125k (explicit costs) + the 35k (implicit included) = $160,000

and Total revenues = $155,000

TR(155k) - TC(160k) - $-5000

Therefore Sally actually lost -5000 on her investment

Answer  - (B)

Answer  - (D)

Salary given up, foregone, lost, sacrificed = $12,000

Yearly Cost of school = $4,600

Total opportunity cost = $16,600

Answer  - (A)

If nothing is sacrificed, foregone, given-up or lost then it is a free good.

Carl Menger