in quantity demanded.

Access for free at openstax.org
547

4. This is a negative income effect. Because your parents’ check failed to arrive, your monthly income is less

than normal and your budget constraint shifts in toward the origin. If you only buy normal goods, the

decrease in your income means you will buy less of every product.

Chapter 7

1. Accounting profit = total revenues minus explicit costs = $1,000,000 – ($600,000 + $150,000 + $200,000) =

$50,000.

2. Economic profit = accounting profit minus implicit cost = $50,000 – $30,000 = $20,000.

3.

Quantity

Variable

Cost

Fixed

Cost

Total

Cost

Average Variable

Average Total

Marginal

Cost

Cost

Cost

0

1

2

3

4

5

6

0

$10

$25

$45

$70

$100

$135

$30

$30

$30

$30

$30

$30

$30

$30

$40

$55

$75

-

$10.00

$12.50

$15.00

$100

$17.50

$130

$20.00

$165

$22.50

-

$40.00

$27.50

$25.00

$25.00

$26.00

$27.50

$10

$15

$20

$25

$30

$35
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