Whether Amos McCoy is currently earning an economic profit or not. Concept Introduction: Amos McCoy is not currently making an economic profit. Difference between the revenue received from the sale of an output and the opportunity cost of the inputs is called economic profit . Total earnings calculated according to generally accepted accounting principles (GAAP) is called accounting profit.

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Answer 1

Question

Chapter 7, Problem 1.1PA

To determine

Whether Amos McCoy is currently earning an economic profit or not.

Concept Introduction:

Amos McCoy is not currently making an economic profit. Difference between the revenue received from the sale of an output and the opportunity cost of the inputs is called economic profit. Total earnings calculated according to generally accepted accounting principles (GAAP) is called accounting profit.

Expert Solution & Answer

Explanation of Solution

Both alternatives are considered (i.e explicit and implicit cost) while estimating economic cost. Accounting cost does not take into consideration implicit cost. Opportunity cost associated with raising soyabean is being ignored while calculating accounting profit. While raising corn at a profit of $100 per acer, profit of $200 per acer is being ignored on soyabean. Economic loss of $100 is being incurred ($200-$100=$100). Amos McCoy is not currently making an economic profit. In the end, it should be concluded that he should grow soyabeans and get out of the corn business.

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Problem 3 You are given the following demand for European luxury automobiles: Q=1,000 P-0.5.2/1.6 where P-Price of European luxury cars PA = Price of American luxury cars P, Price of Japanese luxury cars I= Annual income of car buyers Assume that each of the coefficients is statistically significant (i.e., that they passed the t-test). On the basis of the information given, answer the following questions 1. Comment on the degree of substitutability between European and American luxury cars and between European and Japanese luxury cars. Explain some possible reasons for the results in the equation. 2. Comment on the coefficient for the income variable. Is this result what you would expect? Explain. 3. Comment on the coefficient of the European car price variable. Is that what you would expect? Explain.

Problem 2: A manufacturer of computer workstations gathered average monthly sales figures from its 56 branch offices and dealerships across the country and estimated the following demand for its product: Q=+15,000-2.80P+150A+0.3P+0.35Pm+0.2Pc (5,234) (1.29) (175) (0.12) (0.17) (0.13) R²=0.68 SER 786 F=21.25 The variables and their assumed values are P = Price of basic model = 7,000 Q==Quantity A = Advertising expenditures (in thousands) = 52 P = Average price of a personal computer = 4,000 P. Average price of a minicomputer = 15,000 Pe Average price of a leading competitor's workstation = 8,000 1. Compute the elasticities for each variable. On this basis, discuss the relative impact that each variable has on the demand. What implications do these results have for the firm's marketing and pricing policies? 2. Conduct a t-test for the statistical significance of each variable. In each case, state whether a one-tail or two-tail test is required. What difference, if any, does it make to…

Answer 2

Question

Chapter 7, Problem 1.1PA

To determine

Whether Amos McCoy is currently earning an economic profit or not.

Concept Introduction:

Amos McCoy is not currently making an economic profit. Difference between the revenue received from the sale of an output and the opportunity cost of the inputs is called economic profit. Total earnings calculated according to generally accepted accounting principles (GAAP) is called accounting profit.

Expert Solution & Answer

Explanation of Solution

Both alternatives are considered (i.e explicit and implicit cost) while estimating economic cost. Accounting cost does not take into consideration implicit cost. Opportunity cost associated with raising soyabean is being ignored while calculating accounting profit. While raising corn at a profit of $100 per acer, profit of $200 per acer is being ignored on soyabean. Economic loss of $100 is being incurred ($200-$100=$100). Amos McCoy is not currently making an economic profit. In the end, it should be concluded that he should grow soyabeans and get out of the corn business.

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Answer 3

Question

Chapter 7, Problem 1.1PA

To determine

Whether Amos McCoy is currently earning an economic profit or not.

Concept Introduction:

Amos McCoy is not currently making an economic profit. Difference between the revenue received from the sale of an output and the opportunity cost of the inputs is called economic profit. Total earnings calculated according to generally accepted accounting principles (GAAP) is called accounting profit.

Expert Solution & Answer

Explanation of Solution

Both alternatives are considered (i.e explicit and implicit cost) while estimating economic cost. Accounting cost does not take into consideration implicit cost. Opportunity cost associated with raising soyabean is being ignored while calculating accounting profit. While raising corn at a profit of $100 per acer, profit of $200 per acer is being ignored on soyabean. Economic loss of $100 is being incurred ($200-$100=$100). Amos McCoy is not currently making an economic profit. In the end, it should be concluded that he should grow soyabeans and get out of the corn business.

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Answer 4

Question

Chapter 7, Problem 1.1PA

To determine

Whether Amos McCoy is currently earning an economic profit or not.

Concept Introduction:

Amos McCoy is not currently making an economic profit. Difference between the revenue received from the sale of an output and the opportunity cost of the inputs is called economic profit. Total earnings calculated according to generally accepted accounting principles (GAAP) is called accounting profit.

Expert Solution & Answer

Explanation of Solution

Both alternatives are considered (i.e explicit and implicit cost) while estimating economic cost. Accounting cost does not take into consideration implicit cost. Opportunity cost associated with raising soyabean is being ignored while calculating accounting profit. While raising corn at a profit of $100 per acer, profit of $200 per acer is being ignored on soyabean. Economic loss of $100 is being incurred ($200-$100=$100). Amos McCoy is not currently making an economic profit. In the end, it should be concluded that he should grow soyabeans and get out of the corn business.

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Answer 5

Chapter 7, Problem 1.1PA

To determine

Whether Amos McCoy is currently earning an economic profit or not.

Concept Introduction:

Amos McCoy is not currently making an economic profit. Difference between the revenue received from the sale of an output and the opportunity cost of the inputs is called economic profit. Total earnings calculated according to generally accepted accounting principles (GAAP) is called accounting profit.

Expert Solution & Answer

Explanation of Solution

Both alternatives are considered (i.e explicit and implicit cost) while estimating economic cost. Accounting cost does not take into consideration implicit cost. Opportunity cost associated with raising soyabean is being ignored while calculating accounting profit. While raising corn at a profit of $100 per acer, profit of $200 per acer is being ignored on soyabean. Economic loss of $100 is being incurred ($200-$100=$100). Amos McCoy is not currently making an economic profit. In the end, it should be concluded that he should grow soyabeans and get out of the corn business.

Answer 6

Chapter 7, Problem 1.1PA

To determine

Whether Amos McCoy is currently earning an economic profit or not.

Concept Introduction:

Amos McCoy is not currently making an economic profit. Difference between the revenue received from the sale of an output and the opportunity cost of the inputs is called economic profit. Total earnings calculated according to generally accepted accounting principles (GAAP) is called accounting profit.

Expert Solution & Answer

Explanation of Solution

Both alternatives are considered (i.e explicit and implicit cost) while estimating economic cost. Accounting cost does not take into consideration implicit cost. Opportunity cost associated with raising soyabean is being ignored while calculating accounting profit. While raising corn at a profit of $100 per acer, profit of $200 per acer is being ignored on soyabean. Economic loss of $100 is being incurred ($200-$100=$100). Amos McCoy is not currently making an economic profit. In the end, it should be concluded that he should grow soyabeans and get out of the corn business.

Answer 7

Chapter 7, Problem 1.1PA

To determine

Whether Amos McCoy is currently earning an economic profit or not.

Concept Introduction:

Amos McCoy is not currently making an economic profit. Difference between the revenue received from the sale of an output and the opportunity cost of the inputs is called economic profit. Total earnings calculated according to generally accepted accounting principles (GAAP) is called accounting profit.

Answer 8

Expert Solution & Answer

Explanation of Solution

Both alternatives are considered (i.e explicit and implicit cost) while estimating economic cost. Accounting cost does not take into consideration implicit cost. Opportunity cost associated with raising soyabean is being ignored while calculating accounting profit. While raising corn at a profit of $100 per acer, profit of $200 per acer is being ignored on soyabean. Economic loss of $100 is being incurred ($200-$100=$100). Amos McCoy is not currently making an economic profit. In the end, it should be concluded that he should grow soyabeans and get out of the corn business.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Ch. 7 - Prob. 1.1PA Ch. 7 - Prob. 1.2PA Ch. 7 - Prob. 1.3PA Ch. 7 - Prob. 1.4PA Ch. 7 - Prob. 2.5PA Ch. 7 - Prob. 2.6PA Ch. 7 - Prob. 3.7PA Ch. 7 - Prob. 3.8PA Ch. 7 - Prob. 3.9PA Ch. 7 - Prob. 4.10PA

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