HOMEWORK–Week5
You must show your problem solving process. A solution alone cannot get any credits.
1. Answer the following questions with no more than three sentences.
What is a household? How do households interact with firms in a market?
What is a firm? What other terms do economists use interchangeably with the term “firm”?
What is technology and what factors does it depend on?
What is an entrepreneur?
2. Paul runs a lobster shop in Cape Cod. He is debating whether he should extend his hours of operation. Paul figures that his sales revenue will depend on the number of additional hours the lobster shop is open as shown in the table above. He would have to hire a worker for those hours at a wage rate of $25 per hour.
|
Hours Open |
Total Revenue
(dollars) |
| 1 | $275 |
| 2 | 375 |
| 3 | 450 |
| 4 | 500 |
| 5 | 530 |
| 6 | 550 |
Using marginal analysis, how many hours should Paul extend his hours of operations?
What is Paul’s marginal benefit if he decides to stay open for six hours instead of five hours?
What is Paul’s marginal cost if he decides to stay open for six hours instead of five hours?
