Question : Scenario 1-1 Suppose a t-shirt manufacturer currently sells 5,000 t-shirts per : 1388081

 

 

Scenario 1-1

 

Suppose a t-shirt manufacturer currently sells 5,000 t-shirts per week and makes a profit of $10,000 per week. A manager at the plant observes, “Although the last 400 t-shirts we produced and sold increased our revenue by $4,000 and our costs by $4,800, we are still making an overall profit of $10,000 per week so I think we’re on the right track. We are producing the optimal number of t-shirts.”

 

33) Refer to Scenario 1-1. Using marginal analysis terminology, what is another economic term for the incremental revenue received from the sale of the last 400 t-shirts?

A) gross earnings

B) marginal revenue

C) sales revenue

D) gross profit

 

34) Refer to Scenario 1-1. Using marginal analysis terminology, what is another economic term for the incremental cost of producing the last 400 t-shirts?

A) marginal cost

B) operating cost

C) explicit cost

D) Any of the above terms are correct.

 

 

35) Refer to Scenario 1-1. Had the firm not produced and sold the last 400 t-shirts, would its profit be higher or lower, and if so by how much?

A) Its profit will be $4,800 higher.

B) Its profit will be $800 higher.

C) Its profit will be $800 lower.

D) Its profit will be $4,000 lower.

 

Table 1-1

 

Hours

Open

Total

Revenue

(dollars)

1

$35

2

60

3

80

4

92

5

100

6

105

 

Eva runs a small bakery in the village of Roggerli. She is debating whether she should extend her hours of operation. Eva figures that her sales revenue will depend on the number of hours the bakery is open as shown in the table above. She would have to hire a worker for those hours at a wage rate of $12 per hour.

 

36) Refer to Table 1-1. Using marginal analysis, determine how many hours should Eva extend her bakery’s hours of operations?

A) 2 hours

B) 3 hours

C) 4 hours

D) 5 hours

E) 6 hours

 

 

37) Refer to Table 1-1.  What is Eva’s marginal benefit if she decides to stay open for two hours instead of one hour?

A) $25

B) $36

C) $60

D) $95

 

38) Refer to Table 1-1. What is Eva’s marginal cost if she decides to stay open for two hours instead of one hour?

A) $12

B) $24

C) $36

D) $71

 

 

Table 1-2

 

Hours

Open

Total

Revenue

(dollars)

1

$40

2

  65

3

  80

4

90

5

95

6

98

 

Julius runs a small tailor shop in the city of Bloomfield. He is debating whether he should extend his hours of operation. Julius figures that his sales revenue will depend on the number of hours the tailor shop is open as shown in the table above. He would have to hire a worker for those hours at a wage rate of $18 per hour.

 

39) Refer to Table 1-2. Using marginal analysis, determine how many hours should Julius extend his shop’s hours of operations?

A) 2 hours

B) 3 hours

C) 4 hours

D) 5 hours

E) 6 hours

 

40) Refer to Table 1-2.  What is Julius’s marginal benefit if he decides to stay open for three hours instead of two hours?

A) $15

B) $25

C) $65

D) $80

 

 

41) Refer to Table 1-2. What is Julius’s marginal cost if he decides to stay open for three hours instead of two hours?

A) $0

B) $18

C) $54

D) $65

 

 

42) Tabitha shares a flea market booth with her sister. Her share of the rent is $150 per month. She is considering moving to her own, larger booth which she will not have to share with anyone. The larger booth rents for $450 per month. Recently, you ran into Tabitha in the grocery store and she tells you that she has rented the larger booth.  Tabitha is as rational as any other person. As an economics major, you rightly conclude that

A) Tabitha did not have a choice; her sister was overcharging her.

B) Tabitha figures that the additional benefit of having her own booth (as opposed to sharing) is at least $300.

C) Tabitha figures that the benefit of having her own booth (as opposed to sharing) is at least $450.

D) the cost of having one’s own booth outweighs the benefits.