Your friend Harry has quit his $20,000-a-year job to start a business that rents fishing boats. He asks you to lend him $50,000 and agrees to pay you a 10% return on your $50,000 if he earns a profit
During the first year Harry's total revenue is $120,000 and his total cost for equipment and supplies are $100,000 . Harry tells you that he cannot pay you any interest this year because he did not earn a profit. Is your friend Harry trying to cheat you?
The problem here is that profits are not strictly defined. Harry has made an accounting profit of $20,000, but an economic profit of zero. The $20,000 represents the opportunity cost of Harry's time running the business.
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A production possibilities curve is negatively sloped because: a. unemployment increases as an economy moves down along the curve
b. along the curve, production of one good must be sacrificed in order to increase production of another. c. unemployment decreases as an economy moves down along the curve. d. as the price falls, more goods are purchased.
Geographic immobility in the labor force results in:
A. Homogeneous wage rates B. Homogeneous unemployment rates C. Local labor markets which reach equilibrium quickly and efficiently D. Persistent wage and unemployment differentials in different regions of the country