Homework 1 NAME_____________________ Please type your answers and upload to D2L dropbox folder Question 1. Let’s say that you want to open your own haircut salon. a) What would be the inputs you use in the production? b) What is your output? c) Write down 5 decisions you will have to make (the decisions discussed in the book and class) and specify what you actually decided on in each of thesedecisions. Question 2. a) Over the past 30 years, technological advancements have reduced the cost of computer chips. How do you think this has affected the market for computers? For computer software? For typewriters? b) Suppose that in the year 2015 the number of births is temporarily high. How does this baby boom affect the price of babysitting services in 2020 and in 2030? (hint: 5-year-olds need babysitters, whereas 15-year-olds can be babysitters Question 3.You are thinking of opening a hardware store. You estimate it will cost $100,000 a year to rent a storefront and $400,000 to renovate and purchase equipment. You will also have to quit your current job which pays $50,000 a year. a. What are your explicit costs of opening a hardware store? Implicit costs? b. If you calculate that your revenue in the first year will be $510,000, what is your accounting profit? Economic profit? c. If you are motivated by profit only, should you stay at your current job or open your own store? Question 4. a) The table below illustrates quantities supply and demanded for flashlights. Does the Law of demand holds in this market? What about the law of supply? What do you think is the equilibrium price in this market? Price Quantity Demanded Per Month Quantity Supplied Per Month $5 6,000 10,000 $4 8,000 8,000 $3 10,000 6,000 $2 12,000 4,000 $1 14,000 2,000 b) Suppose the price is currently $5. Will we have more buyers or sellers in this market? Why is this a problem? What would you expect to happen to price? c) Suppose the price is currently $2. Will we have more buyers or sellers in this market Why is this a problem? What would you expect to happen to price?
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