PRINCIPLES OF MICROECONOMICS 1201
Assigned: July 31, 2019
Due: Aug12, 2019
- Answer all thequestions
- Late assignment will not be accepted.
- Get to the point. Be clear and concise.
- You may submit the assignment in a group of up to four students. Make sure you indicate clearly the names and IDs on the cover page of the assignment
Use the following data to work Problems a and b.
Joe is a computer programmer who earned $35,000 in 2016. But on January 1, 2017, Joe opened a body board manufacturing business. At the end of the first year of operation, he submitted the following information to his accountant:
- He stopped renting out his cottage for $3,500 a year and used it as his factory. The market value of the cottage increased from $70,000 to $71,000.
- He sold $160,000 worth of body boards.
He spent $50,000 on materials, phone, etc.
He leased machines for $10,000 a year.
He paid $15,000 in wages.
He used $10,000 from his savings account, which earns 5 percent a year interest.
He borrowed $40,000 at 10 percent a year.
- Calculate Joeâ€™s economic profit.
- Joeâ€™s accountant recorded the depreciation on his cottage during 2018 as $7,000. According to the accountant, what accounting profit did Joe make?
Use the following information to answer problems a,b, and c
Moore â€œfast foodâ€ shop
Most retailers are blaming the economy for their poor sales, but one store chain that sells â€œfast foodâ€ is boldly declaring that an economic downturn can actually be a boom for its business. Last year, Moore â€œfast foodâ€ took in $20 million in sales, up 5% from the previous year.
- According to the above, is â€œfast foodâ€ a normal good or an inferior good? If the price of â€œfast foodâ€ falls and income remains the same, explain how the quantity of â€œfast foodâ€ bought changes.
- Describe the substitution effect and the income effect that occur.
- Use a graph of a familyâ€™s indifference curves for â€œfast foodâ€ and other goods. Then draw two budget lines to show the effect of a fall in income on the quantity of â€œfast foodâ€ purchased.