Chapter 2 HWMK
Suppose Natasha currently makes $50,000 per year working as a manager at a cable TV company. She then develops two possible entrepreneurial business opportunities. In one, she will quit her job to start an organic soap company. In the other, she will try to develop an Internet-based competitor to the local cable company. For the soap-making opportunity, she anticipates annual revenue of $465,000 and costs for the necessary land, labor, and capital of $395,000 per year. For the Internet opportunity, she anticipates costs for land, labor, and capital of $3,250,000 per year as compared to revenues of $3,275,000 per year. What opportunity should she pursue?
She would pursue the soap business.
Ted and Fred are the owners of a gas station. They invested $150,000 each and pay an employee named Lawrence $35,000 per year. This year revenues are $900,000, while costs are $940,000. Who is legally responsible for bearing the $40,000 loss? Lawrence Ted Ted and Fred Lawrence, Ted, and Fred
Ted and Fred
With current technology, suppose a firm is producing 400 loaves of banana bread daily. Also assume that the least-cost combination of resources in producing those loaves is 5 units of labor, 7 units of land, 2 units of capital, and 1 unit of entrepreneurial ability, selling at prices of $40, $60, $60, and $20, respectively. Assume the firm can sell these 400 loaves at $2 per unit. a. What is its total revenue? b. What is its total cost? c.What is the firm's profit or loss? The firm generates an economic ____ of... d. Will it continue to produce banana bread? e. If this firm's situation is typical for the other makers of banana bread, will resources flow toward or away from this bakery good? Resources will ... this bakery good.
a. $800 b. $760 c. profit, $40 d. Yes e. flow towards
Match each term with the correct definition. a. An institution that brings buyers and sellers together: b. The right of private persons and firms to obtain, control, employ, dispose of, and bequeath land, capital, and other property: c. The presence in a market of independent buyers and sellers who compete with one another and who are free to enter and exit the market as they each see fit: d. The freedom of firms to obtain economic resources, decide what products to produce with those resources, and sell those products in markets of their choice: e. What each individual or firm believes is best for itself and seeks to obtain: f. Economic transactions willingly undertaken by both the buyer and the seller because each feels that the transaction will make him or her better off: g. The freedom of resource owners to dispose of their resources as they think best; of workers to enter any line of work for which they are qualified; and of consumers to spend their incomes in whatever way they feel is most appropriate:
a. Market b. Private Property c. Competition d. Freedom of Enterprise e. Self-Interest f. Mutually Agreeable g. Freedom of Choice
Barter requires that you are a member of an established barter network. know the market value of all the goods and services that you want and have to offer. find a person who has what you want and a person who needs what you have to offer. live in an area where there are people with diverse talents and a market with diverse products. The use of money provides a common value that makes buying and selling transactions simpler than would be the case with barter. provides a common value that makes buying and selling transactions simpler as long as there is one currency in use. establishes the value of goods and services. provides a common value that makes bartering transactions simpler. Consider the statement: "We want money only to part with it." When people express a desire to have money, they really want a larger balance in their checking accounts. to be rich. the goods and services that money can buy. a better paying job.
find a person who has what you want and a person who needs what you have to offer. provides a common value that makes buying and selling transactions simpler than would be the case with barter. the goods and services that money can buy.
The use of capital in the production process improves efficiency, increases output, and provides for growth. replaces labor. improves efficiency, reduces output, and provides for growth. is more expensive than labor. "Division of labor" means that workers identify the products than can be produced so that they can take advantage of their individual abilities and skills. share the labor needed to complete a job. specialize in tasks that take advantage of their individual abilities and skills. develop skills needed to complete a job. When an economy relies on specialization, there will be more efficiency in production, but there will be disruptions in the distribution of goods. trade enables individuals to obtain the goods in which they do not have a specialization. centralized coordination is needed to ensure that everyone obtains the goods they need. trade is established according to the value of the specialized product.
improves efficiency, increases output, and provides for growth. specialize in tasks that take advantage of their individual abilities and skills. trade enables individuals to obtain the goods in which they do not have a specialization.
In a market system, scarce goods are allocated through the operation of market prices that are determined by consumers and producers acting in the public's interest. fixed prices that are determined by consumers and producers acting in the public interest. estimated prices that are determined by consumers and producers acting in their own self-interest. market prices that are determined by consumers and producers acting in their own self-interest. In a command economy, scarce goods are allocated by a government-appointed planning board based on the board's preferences. an elected planning board based on the board's preferences. an elected planning board based on the board's long-term priorities. a government-appointed planning board based on the board's long-term priorities.
market prices that are determined by consumers and producers acting in their own self-interest. a government-appointed planning board based on the board's long-term priorities.
LAST WORD Millions of economic resources tend to get arranged logically and productively rather than haphazardly and unproductively because producers could not produce products if it was any other way. consumers would not buy products if it was any other way. market prices don't respond to buyers or sellers. private property owners are motivated to protect and maximize the benefits from their property.
private property owners are motivated to protect and maximize the benefits from their property.
