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Exam 1 Review Learning?Objective:?01-01?Define?economics?and?the?features?of?the?economic?perspective.Learning?Objective:?01-02?Describe?the?role?of?economic?theory?in?economics.Learning?Objective:?01-03?Distinguish?microeconomics?from?macroeconomics?and?positive?economics?from?normative?economics.Learning?Objective:?01-05?List?the?categories?of?scarce?resources?and?delineate?the?nature?of?societys?economizing?problem.Learning?Objective:?01-06?Apply?production?possibilities?analysis;?increasing?opportunity?costs;?and?economic?growth.Learning?Objective:?01-07?Explain?how?economic?growth?and?international?trade?increase?consumption?possibilities.Learning?Objective:?02-01?Differentiate?between?laissez-faire?capitalism;?the?command?system;?and?the?market?system.Learning?Objective:?02-02?List?the?main?characteristics?of?the?market?system.Learning?Objective:?02-03?Explain?how?the?market?system?answers?the?five?fundamental?questions?of?what?to?produce;?how?to?produce;?who?obtains?the?output;?how?to?adjust?to?change;?and?how?to?promote?progress.Learning?Objective:?02-04?Explain?the?operation?of?the?"invisible?hand"?and?why?market?economies?usually?do?a?better?job?than?command?economies?at?efficiently?transforming?economic?resources?into?desirable?output.Learning?Objective:?02-05?Describe?the?mechanics?of?the?circular?flow?model.Revisit how to graph and calculate a budget line, what happens to it when there is a change in income. Be able to show the change graphically.Revisit how to calculate marginal and total opportunity cost of producing an additional itemProblem 2 Chapter 2 and answerSuppose Natasha currently makes $50,000 per year working as a manager at a cable TV company. She then develops two possible entrepreneurial business opportunities. In one, she will quit her job to start an organic soap company. In the other, she will try to develop an Internet-based competitor to the local cable company. For the soap-making opportunity, she anticipates annual revenue of $465,000 and costs for the necessary land, labor, and capital of $395,000 per year. For the Internet opportunity, she anticipates costs for land, labor, and capital of $3,250,000 per year as compared to revenues of $3,275,000 per year. (a) Should she quit her current job to become an entrepreneur? (b) If she does quit her current job, which opportunity would she pursue? LO3Answers: (a) Yes; (b) She should pursue the soap business.Feedback: Natasha should quit her job only if the net revenue from the entrepreneurial business opportunity exceeds that of her current wage (net revenue equals revenue minus cost. This could also be defined as accounting profit). For example, consider the following values. Suppose Natasha currently makes $50,000 per year working as a manager at a cable TV company. She then develops two possible entrepreneurial business opportunities. In one, she will quit her job to start a hand-made soap company. In the other, she will try to develop an internet-based competitor to the cable company. For the soap-making opportunity, she anticipates annual revenue of $465,000 and costs for the necessary land, labor, and capital of $395,000 per year. For the WiFi opportunity, she anticipates costs for land, labor, and capital of $3,250,000 per year as compared to revenues of $3,275,000 per revenue from the hand-made soap company equals $465,000 (revenue) minus $395,000 (cost). This net revenue of $70,000 (= $465,000 - $395,000) exceeds Natasha's current wage of $50,000, thus she should develop this company instead of working for the TV company. The net revenue from WiFi company equals $3,275,000 (revenue) minus $3,250,000 (cost). This net revenue of $25,000 (= $3,275,000 - $2,250,000) is less than Natasha's current wage of $50,000, thus she should not develop this company and continue working for the TV company.In summary, Natasha should quit her job and start the hand-made soap company. ................
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