Question

3. Charlene, a chemist, worked in a chemistry lab and earned $60,000 per year. Charlene quit in order to start her own business. To buy the necessary equipment, she withdrew $50,000 from her savings, (which paid two percent interest per year) and borrowed $60,000 from her Aunt Bea, whom she pays five percent interest per year. Last year she paid $48,000 for ingredients and paid all of the interest on the loan from her aunt. She had revenue of $124,000. For last year, Alvin, the accountant, says Charlene’s profit is ________ and Emily the economist, says Charlene’s profit is ________.
A. $76,000; $12,000
B. $73,000; $14,000
C. $73,000; $12,000.
D. $73,000; $13,000.
E. $72,000; $13,000.

4. which of the following statements is (are) correct?
(x) In the short run, if a firm produces nothing, then, by definition, fixed costs will equal zero.
(y) Fixed costs can be defined as costs that are incurred even if nothing is produced.
(z) Although fixed costs do not vary as a firm varies the output amount that it produces, average fixed costs for the firm do vary as the amount of output varies.
A. (x), (y) and (z)
B. (x) and (y) only
C. (x) and (z) only
D. (y) and (z) only
E. (z) only

Answer 1

- 4 Option D is correct - D) (y) and (3) Only 5 4 When nothing is produced, fixed I costs are being incurred to set up = the facility which we have to Depending on the increase in capex as the demand increases, there is additional Capital infusion has to be done which increases the fixed costs.

) Total Revenue = $1,24,000 Paid for ingredient = $ 48,000 Interest paid to Aunt = 5 x $60,000 $ 3,000 11 Total - profit as per accountant 1,2 4,000 - 48,000 - 3000 2 $ 73,000 - - As per the economist, the protit is after deducting the opp watunity Cost - 73,000 - 60,000 - - 2*[50,000] LUAH => $ 12,000 is Therefore, the option ($ 73,000, 512000