ECN104 - QUIZ #4 ECN 104

1. Suppose Adam is deciding what mode of transportation to take to get to work in the morning. If Adam decides to take the subway, which of the following is an explicit cost of his decision? Answer: the $2.50 it costs to ride the subway 2. Suppose a firm has annual revenue of $600,000 from producing cars. Alternatively, the firm could produce only the Engines and earn revenue equal to 100,000. Assume that the firm's annual raw materials costs are equal to 400,000 and that the rent it pays for its production facilities is equal to 50,000. Then, the firms economic profit is equal to: Answer: $150,000 3. Tommy quit his job that paid 60,000 per year and started a Tommy’s wicker furniture store. To set up business Tommy used the 100,000 he had saved in a mutual fund, that he was earning 5% each year ($5,000). Tommy used the 100,000 to purchase furniture for the showroom. Additionally, he ran to the show room for 15,000 for the year. In his first year, his revenue from selling his furniture was 150,000. What are the total implicit costs of Tommy’s wicker furniture store? Answer: $65,000 4. Tommy quit his job that paid 6