Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN: 9781305506725
Author: James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher: Cengage Learning
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Chapter 21, Problem 11CQ
To determine
Principal agent problem between owners and managers.
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Chapter 21 Solutions
Economics: Private and Public Choice (MindTap Course List)
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- You turned down a job at ABC Corp last year that would have paid you $125,000 per year and started your own company. When you calculated your economic profit, it came out at $0. You expect the business will be exactly the same next year. ABC called and said you could still take the job. You should... A. Keep running your company as-is. B. Keep running your company but pay yourself less. C. Keep running your company but pay yourself more. D. Shut down your company and take the job at ABC.arrow_forwardHow much should a firm sell of a particular product in order to maximize profit? What factor does it have to consider in arriving at this decision?arrow_forwardShould a company produce more goods when marginal revenue is greater than marginal costs? Explain.arrow_forward
- There are 38 nearly identical ABC stores within a one-mile radius in Waikiki. The combined size of these 38 stores allows ABC to offer large quantities at favorable prices. a. ABC gained market power through economies of scale government protection control of an important input . b. ABC’s market power does does not guarantee that the firm makes an economic profit.arrow_forwardDiscuss where does the shutdown being and why? What does the company has to do to get back to supernormal profit?arrow_forwardHow does a firm decide whether to stay in business if it is earning a loss? Discuss in detail.arrow_forward
- Why would a firm that incurs losses choose to produce rather than shut down?arrow_forwardShould the firm shut down in the short-run? Explain in detail why or why not.arrow_forwardSuppose that Nike's Fortnite concert led to a huge spike in economic profit. Why is it likely that this profit would be temporary?arrow_forward
- Rob quit his $4,000/month coffee shop position and started an ice-cream business. Rob does not get paid a salary for running the ice-cream business. When calculating the economic profit of the ice-cream business, his old $4,000 coffee shop salary is Select one: a. counted as part of the total revenue. b. counted as part of the implicit costs. c. counted as part of the explicit costs. d. ignored.arrow_forwardPlease help someonearrow_forwardTim is thinking of opening a garment store. He estimates that it would cost $270000 per year to rent the location and buy the merchandise. In addition, he would have to quit his $63000 per year day job. Tim estimates he can sell $315600 worth of garments in a year. a. What will be the accounting profit and economic profit for Tim? b. If you are an economist, should you suggest opening the store? Why?arrow_forward
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