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| − | '''Introductory''': 1. “Accounting profit” is ________ minus _________. | + | '''Introductory''': 1. “[[Accounting profit]]” is ________ minus _________. |
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| | '''revenue minus explicit costs''' | | '''revenue minus explicit costs''' |
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| | 2. Suppose your company spends $10,000 on labor and $30,000 on equipment for an output of 5000 widgets. You increase your labor costs to $15,000 and your equipment costs to $45,000, and your output increases to 8000. Describe your return to scale: increasing, constant, or decreasing? | | 2. Suppose your company spends $10,000 on labor and $30,000 on equipment for an output of 5000 widgets. You increase your labor costs to $15,000 and your equipment costs to $45,000, and your output increases to 8000. Describe your return to scale: increasing, constant, or decreasing? |
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| − | '''This is increasing returns to scale, because your output increased by a larger percentage than your inputs did.''' | + | '''This is increasing [[returns to scale]], because your output increased by a larger percentage than your inputs did.''' |
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| | '''Intermediate''': 3. Suppose the population doubled and the other utilized economic inputs (air, water, capital, etc.) doubled as needed. What would happen to economic output, such as new inventions and food production? In other words, what is the return to scale from increasing population (labor) and other inputs? | | '''Intermediate''': 3. Suppose the population doubled and the other utilized economic inputs (air, water, capital, etc.) doubled as needed. What would happen to economic output, such as new inventions and food production? In other words, what is the return to scale from increasing population (labor) and other inputs? |
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| | '''This suggestion is risky. We need to know more about the market demand. We need to know whether we have increasing, constant, or decreasing returns to scale. We need to know if Wal-Mart is going to move into our market! As in real life, the best answer is this: we need more information before deciding.''' | | '''This suggestion is risky. We need to know more about the market demand. We need to know whether we have increasing, constant, or decreasing returns to scale. We need to know if Wal-Mart is going to move into our market! As in real life, the best answer is this: we need more information before deciding.''' |
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| − | 5. In an online encyclopedia such as Wikipedia or Conservapedia, would you say that the marginal product of adding another contributor (editor) increases or decreases? What does that imply about the growth path of the project? | + | 5. In an online encyclopedia such as [[Wikipedia]] or [[Conservapedia]], would you say that the marginal product of adding another contributor (editor) increases or decreases? What does that imply about the growth path of the project? |
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| | '''The instructor's view is that marginal product increases with each additional editor, because they can cross-link to each other's articles, discuss ideas with each other, and enjoy the cite more. On Wikipedia, about 410,000 articles were created in the first 5 years, but in the last two years 1.3 million articles have been created. We don't know how many editors they have had but I would guess that marginal product of an additional editor is greater the bigger the project is.''' | | '''The instructor's view is that marginal product increases with each additional editor, because they can cross-link to each other's articles, discuss ideas with each other, and enjoy the cite more. On Wikipedia, about 410,000 articles were created in the first 5 years, but in the last two years 1.3 million articles have been created. We don't know how many editors they have had but I would guess that marginal product of an additional editor is greater the bigger the project is.''' |
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| | '''Honors''': | | '''Honors''': |
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| − | 8. Suppose you invented fertilizer that is costly to make but has an ever-increasing marginal product. Suppose you own an acre of farmland in South Jersey, and now must decide between spending your money on buying more acres to use the fertilizer, or making more fertilizer. Which should you do? Explain. | + | 8. Suppose you invented fertilizer that is costly to make but has an ever-increasing [[marginal product]]. Suppose you own an acre of farmland in South Jersey, and now must decide between spending your money on buying more acres to use the fertilizer, or making more fertilizer. Which should you do? Explain. |
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| | 9. A company’s stock price often rises when it announces taking a large one-time write-off (or loss) on its accounting books. Using one or more principles learned in this course, can you explain reasons for that effect on the stock price? | | 9. A company’s stock price often rises when it announces taking a large one-time write-off (or loss) on its accounting books. Using one or more principles learned in this course, can you explain reasons for that effect on the stock price? |
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| − | 10. The tremendous economic growth of the 1980s and 1990s resulted from the “supply side” economic policies of President Ronald Reagan, which boosted production by cutting taxes and encouraging investment. Why might the supply side be more important than the demand side? | + | 10. The tremendous economic growth of the 1980s and 1990s resulted from the “supply side” economic policies of President [[Ronald Reagan]], which boosted production by cutting taxes and encouraging investment. Why might the supply side be more important than the demand side? |
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| | [[Category:Economics]] | | [[Category:Economics]] |