Concepts Answers Persuasive Essay

Marginal revenue is the additional revenue that a firm obtains by selling one more unit. Marginal cost is the cost of hiring one more unit of labor or the cost of producing one more unit of output. Marginal revenue product is the additional revenue we obtain by hiring one more unit of labor. When we incur a marginal cost our hope it that is will generate marginal revenue product which exceeds the cost. Hence the marginal revenue will exceed our marginal cost. 4. Distinguish between economic and financial capital.
Economic capital resources include all items that man manufactures by combining natural and unman resources like buildings, equipment, roads, and bridges. Financial capital is a dollar value claim on economic capital. Financial capital would include cash, deeds of trust, mortgages, loan papers, stocks, and bonds. 5. Discuss the value of the entrepreneur. What distinguishes the entrepreneur from the labor resource? Why are entrepreneurs unique? Entrepreneurial resources consist of the ideas of individuals, who assume risk and begin business enterprises.
The entrepreneur combines natural, human, and capital resources to produce a good or service that we value more than the individual components. Without the entrepreneur, the other resources would not normally be combined, except for subsistence (I . E. , the resources that are just sufficient to sustain life). The entrepreneur seeks to make a profit when using his ideas. When we look at overall payments, the mental talents of people in the form of the entrepreneur normally exceed the wages that are paid for labor. The owner of a professional sports team, the entrepreneur, will normally make more than any player on that team.

Of course, the more brilliant the idea and its ultimate appeal to the buyer of the good or service, he more profit that will accrue to the entrepreneur. 6. What is opportunity cost? An opportunity cost is the highest value that is surrendered when a decision is made; it is never the decision, which is made. It is a quantifiable term. 7. What makes up gross income? All of the money received from all sources during the year. This includes wages, tips, interest earned on savings and bonds, income from rental property, profits to entrepreneurs, and any other source of income an individual may have. 8.
Compare progressive, regressive, and proportional taxes. Give at least one example of each type of ax. Progressive taxes are taxes that take a larger percentage of your income as your income increases. Regressive taxes are taxes that take a higher percentage of your income as your income decreases. Proportional taxes are taxes where the percentage paid stays the same, regardless of income. Examples include progressive income taxes, regressive sales taxes, and proportional property taxes. 9. What is the law of supply? The law of supply states that as the payment or price of an item increases, coteries Paramus, we will supply more of that item. 0. What is a supply table? How do you obtain supply curve from a supply table? A supply table is a listing of the quantities of some variable, which will be supplied at various prices in the market place. The supply curve is obtained by horizontally summing the quantities supplied by different suppliers at each price in the market. 11. What is the law of demand? The Law of Demand states that if all other factors are constant, as the price for an item decreases, people will demand more of that item, coteries Paramus. 12. Explain the concept of a surplus of money versus a shortage of money.
When the supply of money saved exceeds the demand for money, here is a surplus of money; then institutions (banks, credit unions, savings and loans, etc. ) will pay less for savings, and interest rates will begin to fall. When the demand for money exceeds the supply, there is a shortage of money and interest rates will be bid up in the market as institutions attempt to obtain more money. 13. What is the Federal Reserve? What are the Feud’s three tools for controlling the money supply? The Federal Reserve is the Central Bank of the United States.
The three tools for controlling the money supply are the discount rate, the reserve requirements ratio, and federal open market operations. 4. What is risk? What is the difference between systematic and unsystematic risk? Risk involves the probability that the actual return on an investment will be different from the desired return. Systematic risk is that risk which is associated with economic, political, and sociological changes that affect all participants on a near equal basis. Unsystematic risk is that risk that is unique to an individual, firm, or industry. EXERCISES AND PROBLEMS 1.
Carry Yogi’s Lounge consists of the following. Carry, the owner believed that people would come to hear a band play on Friday, Saturday, and Sunday evening. During the remainder of the week, she believed her customers would watch sporting events on several television sets located throughout the lounge. Carry employed two bartenders, three servers, two assistant servers, two cooks, one dishwasher and a clean-up person. She had a bar, 15 barstools, 4 tables, 40 chairs, 4 television Sets, and one satellite dish. She had an oven, stove, grill, refrigerator, sinks, dishes, and glassware.
Carry started this business with $50,000 of her own money, and she borrowed $1 50,000 from the bank. From this description, list each of the scarce resources that are used in Carry Yogi’s Lounge. Entrepreneurial resource: Carry Yoke. Labor resources: 2 bartenders, 3 servers, 2 assistant servers, 2 cooks, 1 dishwasher, and a clean-up person. Economic capital resources: 1 bar, 15 bar stools, 4 tables, 40 chairs, 4 television sets, one satellite dish, oven, stove, grill, refrigerator, sinks, dishes, and glassware. Financial capital resources: $50,000 of her own money and $1 50,000 from the bank. . Joe Fixity has an appliance repair business. He has more business than he can handle and wants to hire another repair person. Joe estimates that three appliances can be repaired each hour by a qualified person. Joe bills out labor at $45 per hour, but he stipulates that the minimum charge for appliance repair estimates is $30 plus parts. What is the marginal revenue product of a qualified repair person? 3 appliance repairs per hour times $30 = $90 marginal revenue product. What is the maximum hourly wage that he would pay an employee?
Therefore, since we bring in an additional $90 per hour by hiring one more repair person, the maximum wage we would pay is $90. 3. Sam Smith is currently employed as a mechanical engineer and is paid $65,000 per year plus benefits that are equal to 30% of his salary. Sam wants to begin a consulting rim and decides to leave his current job. After his first year in business, Cam’s accountant informed him that he had made $45,000 with his consulting business. Sam also notices that he paid $6,000 for a health insurance policy, which was his total benefit during his first year.
What was Cam’s opportunity cost? Sam gave up $65,000 in salary plus $19,500 in benefits roar total of $84,500. 4. Sara Lee just graduated from college with a degree in accounting. She had five job offers: Bean counters CPA, $35,000; Assets R us, $27,000; The Debit store, $30,000; J & G’s Spa’s, $33,000; and The Double Entry Shop, $40,000. What was her opportunity cost if she accepted the job with The Double Entry Shop? Sara gave up Bean counters CPA at $35,000 which was the highest value surrendered. 5. Sam Club earned $50,000 and paid taxes of $10,000.
Samaritan Heart earned $60,000 and paid taxes of $12,000. If these taxes were paid to the same government agency, is the tax on income progressive, regressive, or proportional? Why did you reach this conclusion? As show below these taxes are proportional because they both paid the same percentage of their income in taxes. 6. You read an article in this mornings paper that stated inflation was accelerating and would reach six percent this year. If the FED believes this statement and it has set a goal of three percent inflation, what will it likely do at the next meeting of the Federal Open Market Committee?
They would most likely raise the discount rate, the federal funds rate, or both. They could also sell more government securities to decrease the money supply. 7. A friend came into your office and said that his bank was out to kill small businesses. You asked him what he meant by this remark, and he said that he read an article that said his bank had just loaned $10 million to a major automobile manufacturer at a rate of 3 percent, which is less than prime. But your friend just borrowed $50,000 from the same bank and they charged him prime plus four percent, or 7. Percent. Your friend has been in business for two years, and last year he had a loss of $2,000. How can you explain this difference in interest rate to your friend? The bank charges interest based upon risk The probability of the automobile manufacturer defaulting on the loan is very remote; therefore, they get a favorable interest rate from the bank. Since your friend lost money last year and since over 40 percent of all mall businesses fail in the first five years, the bank’s risk is much higher and therefore they will charge a higher interest rate.

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