Economics Homework Help

I’m working on a Macro Economics question and need guidance to help me study.

1. Answer
(a) and (b) using this scenario. Suppose you gave up a job offering you
$25,000 annual salary to start your own coffee business. To do so, you
withdrew $20,000 form your savings account that was earning 10% annual
interest for you. Also, you have a building that was earning $8,000 in
the form of annual rent for you, but now you use that space for your
coffee business. You also hired a barista for $15,000 salary. You spent
$30,000 on supplies. You paid $5,000 for utilities. You sold a total of
20,000 coffees for $5 each.

a. Using the information above, calculate accounting profit of your coffee business.

b. Using the information above, calculate economic profit of your coffee business.

c.
Suppose your firm has total fixed costs (FC) of $50,000 per year. The
firm’s average variable cost (AVC) is $10 for 10,000 outputs. At this
level of output, how much is the firm’s average total cost (ATC)? Show
your work.

d.
In the long run, a chair making company incurs total costs of $1,200
when output is 30 chairs and total costs of $1,600 when output is 40
chairs. Does this firm exhibit economies of scale, diseconomies of
scale, or constant returns to scale? Show your work.

2.

a.
What is the profit maximization rule? That is, how do the firms decide
how much to produce and what price to charge in order to maximize their
profit? (Hint: the rule is based on one of the ten principles of
economics.)

b.
Suppose a firm in perfectly competitive market is producing 1000 units
of output. At this level of output, the firm’s marginal cost is $20, and
its average total cost is $25. The firm sells its output for $30 per
unit. How much is the firm’s profit at this level of output?

c. What are the sources of monopoly? Explain the various ways how a monopoly firm comes into existence.