1) Dave currently earns a salary of $1,800 per week as an economics instructor.

Question

1) Dave currently earns a salary of $1,800 per week as an economics instructor. His next best career would have been an assistant manager at Nittany Burger, where he would have earned $25 per hour, and would have worked for 40 hours per week. What weekly economic rent does Dave receive from being an economics instructor?

A) $25
B) $800
C) $1,000
D) $1,775
E) $1,800
F) $0 since he is in his first chosen career

2) In considering economic profit in a market economy, it is correct to say that

A) there should never be any economic profit.
B) economic profit will only occur, even in the short run, as a result of imperfect competition.
C) economic profit performs an important function in allocating resources to their most highly valued uses.
D) economic profit tends to reduce the production efficiency of the economy, leading to wasted resources.

3) Fred's Franks originally sold hotdogs and soft drinks from a cart located in front of City Hall. Then Fred purchased another hotdog cart and hired someone to sell hotdogs and soft drinks near the high school. Both locations have been successful. When Fred's Franks expanded to two locations, which of the following did NOT occur?

A) Fred's production function changed.
B) Production increased.
C) The company increased the inputs it employs.
D) The firm employed additional capital.

Please answer with an explanation. :)

Explanation / Answer

1).

ANS-(C)

25 x 40=$1000.

2).

ANS-(C) economic profit performs an important function in allocating resources to their most highly valued uses.

3).

ANS-(A) Fred's production function changed.

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