Question

10)

If Zach decides to begin working on his own internet startup business, he will have to quit his current full-time job earning $70,000 per year and instead switch to a part-time job earning $20,000 per year. With his newly available hours he can work on his business, and each year he expects the business to make $200,000 in revenues with annual explicit costs of $140,000. Assuming all relevant information has been provided, what is the economic profit of starting the business (and switching jobs)?

Group of answer choices

a - $30,000

b - $10,000

c $10,000

d $30,000

8)

When producing its 5th unit a firm's total variable costs increased from 200 to 240. If a firm is facing decreasing marginal returns, which of the following is a possible total variable cost of producing 6 units?

Group of answer choices

a 280

b 300

c 260

d 220

Answer 1

10) option C is correct. Total earning in the year is 200000 dollar + 20000 dollar = 220000 dollar. Explicit cost is 140000 dollar and implicit cost is 70,000. Total cost is 210000 dollar. Economic profit will be 220000 - 210000 = 10000 dollar

8) option B is correct. Because of decreasing marginal returns the marginal cost should continue to increase. For V unit the marginal cost is $40 which can be seen as the difference between the total variable costs. then for the 6th unit the marginal cost should be greater than $40 and the total variable cost should be greater than 280 dollars.