Wanda owns a lemonade stand. She produces lemonade using five inputs: water, sug
ID: 1164181 • Letter: W
Question
Wanda owns a lemonade stand. She produces lemonade using five inputs: water, sugar, lemons, paper cups, and labor. Her costs per glass are as follows: $0.01 for water, $0.02 for sugar, $0.03 for lemons, $0.02 for cups, and $0.10 for the opportunity cost of her labor. She can sell 300 glasses for $0.50 each.
Refer to Scenario 13-8. What are Wanda’s total economic costs per glass?
$0.18
$0.08
$0.02
d. $0.10
also,
Quantity
of
Output
Fixed
Cost
Variable
Cost
Total
Cost
Average
Fixed
Cost
Average
Variable
Cost
Average
Total
Cost
Marginal
Cost
1
$23
$33
2
$38
3
$70
4
$64
5
$110
6
$118
7
$143
8
$185
Refer to Table 13-14. What is the marginal cost of the 2nd unit of output?
$38
$24
$15
$10
Lastly,
Ariana withdrew $400,000 out of her personal savings account and used it to start her new Internet cafe. The savings account pays 3 percent interest per year. During the first year of her business, Ariana sold 2,000 cups of coffee for $2.50 per cup and 4,000 hours of Internet time, also at $2.50 per hour. During the first year, the business made monetary outlays of $9,000. You may assume that there is no opportunity cost to Ariana’s time.
Refer to Scenario 13-12. Ariana’s economic profit for the year was
$-6,000.
$6,000.
$-394,000.
$3,000.
a.$0.18
b.$0.08
c.$0.02
d. $0.10
also,
Quantity
of
Output
Fixed
Cost
Variable
Cost
Total
Cost
Average
Fixed
Cost
Average
Variable
Cost
Average
Total
Cost
Marginal
Cost
1
$23
$33
2
$38
3
$70
4
$64
5
$110
6
$118
7
$143
8
$185
Refer to Table 13-14. What is the marginal cost of the 2nd unit of output?
a.$38
b.$24
c.$15
d.$10
Lastly,
Ariana withdrew $400,000 out of her personal savings account and used it to start her new Internet cafe. The savings account pays 3 percent interest per year. During the first year of her business, Ariana sold 2,000 cups of coffee for $2.50 per cup and 4,000 hours of Internet time, also at $2.50 per hour. During the first year, the business made monetary outlays of $9,000. You may assume that there is no opportunity cost to Ariana’s time.
Refer to Scenario 13-12. Ariana’s economic profit for the year was
a.$-6,000.
b.$6,000.
c.$-394,000.
d.$3,000.
Explanation / Answer
13-8.
Economic Costs includes both direct and indirect costs
Water
Sugar
Lemons
Cups
Opp Cost
Economic Costs
0.01
0.02
0.03
0.02
0.1
13-14
Option c
Quantity
Average
Average
Average
of
Fixed
Variable
Total
Fixed
Variable
Total
Marginal
Output
Cost
Cost
Cost
Cost
Cost
Cost
Cost
1
$10
$23
$33
$10
$23
$33
2
$10
$38
$48
$5
$19
$24
15
3
$10
$60
$70
$3
$20
$23
22
4
$10
$64
$74
$3
$16
$19
4
5
$10
$100
$110
$2
$20
$22
36
6
$10
$118
$128
$2
$20
$21
18
7
$10
$143
$153
$1
$20
$22
25
8
$10
$175
$185
$1
$22
$23
32
13-12
Option a
Year
No of cups
Price
Internet
Price
TR
1
2000
2.5
4000
2.5
15000
Cost
Interest forgone
12000
Monetary outlays
9,000
Economic Cost
21,000
Economic profit = TR-Economic Cost = 15000-21000 = -$6000
Water
Sugar
Lemons
Cups
Opp Cost
Economic Costs
0.01
0.02
0.03
0.02
0.1
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