Income statement for Sizzling Foods, Inc. is shown below:
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2011
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Revenues
Revenue from sales of goods and services.................
Operating costs and expenses:
Cost of products and services sold..........................
Selling expenses...............................................
Administrative expense.......................................
Total operating costs and expenses......................
Income from operations............................................
Interest expense (corporate bonds & loans).....................
Non-recurring expense (Legal expenses/fines in
settling a federal antitrust suit................................
Income taxes.........................................................
Net income............................................................
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$80,000,000
$30,000,000
$3,000,000
$4,000,000
$37,000,000
$43,000,000
$300,000
$200,000
$700,000
$41,800,000
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In 2011, Sizzling Foods owned and occupied an office building in downtown Indianapolis. The building could have been leased to other businesses for $2,000,000 in lease income for 2011. Sizzling food also owned undeveloped land valued at $15,000,000 which is used by employees as a parking lot. Owners of Sizzling Foods can earn a 14% rate of return on that land it they leased it others as a parking lot. Their economic profit is:
1) $19,000,000
2) $21,800,000
3) $38,200,000
4) $41,000,000
5) $39,700,000
Question 2
Which of the following would increase the supply of corn?
1) an increase in the price of pesticides
2) a decrease in the demand for corn
3) a fall in the price of corn
4) a severe drought in the corn belt
5) a decrease in the price of wheat
Question 3
Which of the following would lead to a DECREASE in the demand for tennis balls?
1) An increase in the price of tennis balls
2) A decrease in the price of tennis rackets
3) An increase in the cost of producing tennis balls
4) A decrease in average household income when tennis balls are a normal good
5) None of the above
Question 4
An agency is having problems with personal phone calls made during working hours. Each minute of a personal call costs the agency $0.50 in wasted wages. The agency decides to hire operators to monitor calls in order to attain the optimal number of personal calls (minimize total cost of personal calls).
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Number of Operators
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Total minutes of personal calls (per hour)
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0
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600
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1
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480
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2
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410
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3
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370
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4
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350
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If operators receive $25 an hour, how many operators should the agency hire?
1) 0
2) 1
3) 2
4) 3
5) 4
Question 5
If the current price of a good is $10, market demand is , and market supply is , then
1) more of the good is being produced than people want to buy.
2) a lower price will increase the shortage.
3) at the current price there is excess demand, or a shortage, of 150 units.
4) Both b and c
Question 6
Suppose Marv, the owner-manager of Marv's Hot Dogs, earned $72,000 in revenue last year. Marv's explicit costs of operation totaled $36,000. Marv has a Bachelor of Science degree in mechanical engineering and could be earning $30,000 annually as mechanical engineer.
1) Marv's implicit cost of using owner-supplied resources is $36,000.
2) Marv's economic profit is $36,000.
3) Marv's implicit cost of using owner-supplied resources is $30,000.
4) Marv's economic profit is $6,000.
5) both c and d.
Question 7
Suppose that the Houston Rockets' management is considering a plan in which fans who donate blood can attend games for $35 instead of the usual $40. If both ticket revenues and blood donations rise with this plan, which of the following is true?
1) The demand for Houston Rockets' tickets is price elastic.
2) The demand for Houston Rockets' tickets is price inelastic.
3) The demand for blood donations is price elastic.
4) The demand for blood donations is price inelastic.
Question 8
Timbuktu
Clinic uses doctors and nurses optimally and is servicing the maximum number of patients given a limited annual payroll. The last doctor hired treated 1,600 extra patients in a year, while the last nurse hired treated 1,000 extra patients in a year. If doctors make $80,000 a year and nurses make $40,000 a year, then
1) the clinic could serve more patients by hiring more doctors and fewer nurses.
2) the clinic could serve more patients by hiring fewer doctors and more nurses.
3) the clinic is making the correct decision because doctors are more productive than nurses.
4) the clinic is not making the correct decision because the additional patients per dollar spent on doctors is greater than the additional patients per dollar spent on nurses.
5) both a and d