You are considering buying an apartment as an investment. If the interest rate is 4 percent and the appreciation rate is -2 percent (2 percent depreciation), what has to be the ratio of annual rent to purchase price in order for you to just break even on the investment?
Below is a table showing the relationship between units of labor input and units of output for a barber shop.
| Hours of Labor | Number of haircuts |
|---|---|
| 0 | 0 |
| 1 | 3 |
| 2 | 8 |
| 3 | 15 |
| 4 | 20 |
| 5 | 25 |
| 10 | 50 |
| 15 | 70 |
| 20 | 85 |
| 25 | 97 |
| 30 | 108 |
| 35 | 105 |
Up until what level of labor input are there increasing returns to scale? Over what region are there constant returns to scale? At what point are there diminishing returns to scale? At what point are there negative returns to scale?
Suppose that the barber shop gets $10 for each haircut. If the wage rate if $45 an hour, what is the profit-maximizing number of hours? What is the profit-maximizing number of hours if the wage rate is $30 an hour?
For each anecdote below, state the economic concept that is illustrated. Explain briefly.
Joan declined the writing assignment, even though it would have paid $1000, because she wanted to take a vacation.
As the price of computers have fallen, small companies no longer hire as many bookkeepers.
Middle managers now type their own memos, but CEO's still dictate memos to secretaries.