Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Chapter 11, Problem 3.1P
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A clothing manufacturing firm is deciding whether to invest in a new technology that needs an initial investment of $45,000. This will increase cash flows in the first year by $25,000 and $30,000 in the second year. The firm’s current fixed costs are $9,000 and marginal cost is $15. The firm currently charges $18 per unit. What’s the firm’s contribution margin?
Paolo lives in New York City and runs a business that sells boats. In an average year, he receives $723,000 in revenue from selling boats. Of this sales
revenue, he must pay the manufacturer a wholesale cost of $423.000; he also pays wages and utility bills totaling $267.000. He owns his showroom;
if he chooses to rent it out, he will receive $2.000 in rent per year. Assume that the value of this showroom does not depreciate over the year. Also, if
Paolo does not operate this boat business, he can work as a financial advisor and receive an annual salary of $20,000 with no additional monetary
costs. No other costs are incurred in running this boat business.
Identify each of Paolo's costs in the following table as either an implicit cost or an explicit cost of selling boats.
Implicit Cost Explicit Cost
The rental income Paolo could receive if he chose to rent out his showroom
The wholesale cost for the boats that Paolo pays the manufacturer
The salary Paolo could earn if he worked as a…
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Chapter 11 Solutions
Principles of Economics (12th Edition)
Ch. 11.A - Prob. 1PCh. 11.A - Prob. 2PCh. 11.A - Prob. 3PCh. 11.A - Prob. 4PCh. 11.A - Prob. 5PCh. 11.A - Prob. 6PCh. 11.A - Prob. 7PCh. 11.A - Prob. 8PCh. 11.A - Prob. 9PCh. 11.A - Prob. 10P
Ch. 11.A - Prob. 11PCh. 11.A - Prob. 12PCh. 11 - Prob. 1.1PCh. 11 - Prob. 1.2PCh. 11 - Prob. 1.3PCh. 11 - Prob. 2.1PCh. 11 - Prob. 2.2PCh. 11 - Prob. 2.3PCh. 11 - Prob. 2.4PCh. 11 - Prob. 2.5PCh. 11 - Prob. 2.7PCh. 11 - Prob. 2.8PCh. 11 - Prob. 2.9PCh. 11 - Prob. 3.1PCh. 11 - Prob. 3.2PCh. 11 - Prob. 3.3PCh. 11 - Prob. 3.4PCh. 11 - Prob. 3.5PCh. 11 - Prob. 3.6P
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