Question 01
A firm pays in cash $250000 in wages, $55430 in interest on borrowed money capital and $74320 for the yearly rental of its factory building. If the entrepreneur worked for somebody else as a manager, he would earn at most $44500 per year and if he lent out his money-capital to somebody else in a similarly risky business, he would almost receive $16600 per year. Keeping in view the above information:
(A) Calculate:
a) The explicit cost of the firm.
b) The implicit cost of the firm.
c) The total cost of the firm.
(B) If the entrepreneur received $495680 from selling his year's output, then calculate his total profit.
(C) What will be the total profit if the entrepreneur's total revenue were $413934 instead?
(Marks: A = 2+2+2, B = 2, C = 2)
Question 02
(A) Find the value of multiplier if:
a) MPC = 0.39
b) MPS = 0.64
(B) If the value of the multiplier is 2.49 then find out:
a) MPC
b) MPS
(C) What is the relationship between the value of multiplier and MPC?
(D) Find the change in the equilibrium level of output when there isa$25 increase in investment spending and the MPC is 0.75.
Question 01
A firm pays in cash $250000 in wages, $55430 in interest on borrowed money capital and $74320 for the yearly rental of its factory building. If the entrepreneur worked for somebody else as a manager, he would earn at most $44500 per year and if he lent out his money-capital to somebody else in a similarly risky business, he would almost receive $16600 per year. Keeping in view the above information:
(A) Calculate:
a) The explicit cost of the firm.
b) The implicit cost of the firm.
c) The total cost of the firm.
(B) If the entrepreneur received $495680 from selling his year's output, then calculate his total profit.
(C) What will be the total profit if the entrepreneur's total revenue were $413934 instead?
(Marks: A = 2+2+2, B = 2, C = 2)
Question 02
(A) Find the value of multiplier if:
a) MPC = 0.39
b) MPS = 0.64
(B) If the value of the multiplier is 2.49 then find out:
a) MPC
b) MPS
(C) What is the relationship between the value of multiplier and MPC?
(D) Find the change in the equilibrium level of output when there isa$25 increase in investment spending and the MPC is 0.75.
