Question

1. Joshua currently owns a printing company. The total yearly revenue of his business is $300,000 and total yearly cost is $50,000. Joshua is considering going back to the university to earn a master’s degree in engineering. The master’s degree takes a year to complete. Joshua anticipates that after he graduates with a master’s degree, he will be able to get a job with a salary of $300,000 per year. The total cost of the degree is $60,000 and he has to close his business if he goes to the university. Assuming that there are no other costs than those described in the question, what is the opportunity cost of going to the university for Joshua?

2.

A firm is currently producing in the inelastic portion of its demand curve. What course of action do you recommend for it assuming it wants to raise revenue?

a. None of the other answers is correct

b. Continue selling at the same price, but increase the amount it produces

c. Increase price, because if it increases price and demand is inelastic, total revenue will increase.

e. Continue producing at the current output level, because it maximizes its total revenue by producing in the inelastic portion of its demand curve.

f. Reduce price, because if it reduces price and demand is inelastic, total revenue will increase.

Answer 1