Suppose the quantity of sodas and the quantity of popcorn are on ...

[Starlight]

Suppose the quantity of sodas and the quantity of popcorn are on an indifference curve/budget line diagram. An increase in income shifts the budget line ________ and, if popcorn is a normal good, shifts the demand curve for popcorn ________.
 
  A) rightward; rightward
  B) rightward; leftward
  C) leftward; rightward
  D) leftward; leftward

Question 2

Professor Rush decides to quit teaching economics and opens a shoe store out at the mall. He gave up an annual income of 50,000 to open the store. A year after opening the shoe store, the total revenue for the year was 200,000.
 
  Rush's expenses were 30,000 for labor, rent was 18,000, and utilities were 1,200. He also had to purchase new shoes from manufacturers, at a cost of 60,000, which was financed by cashing in his savings of 60,000 that had been in a bank earning 8 percent per year. The normal profit from operating a shoe store in the mall is 20,000. Determine Professor Rush's total cost and economic profit.

[jazzlynnnnn]

Answer to Question 1

A

Answer to Question 2

The costs are the cost of labor, the rent, the utilities, the cost of the shoes, the forgone interest, the foregone salary, and the normal profit. The forgone interest is (8 percent)  (60,000 ) = 4,800, so the total cost equals 30,000 + 18,000 + 1,200 + 60,000 + 4,800 + 50,000 + 20,000 = 180,000. The economic profit equals the total revenue minus the total opportunity cost so the economic profit = 200,000 - 184,000 = 16,000.