Question:
John works 40 hours a week managing his own business, without drawing a salary. He could be earning $600 a week doing the same job for his former employer. He has invested $100,000 of his own money in his business and owes the bank $100,000. The interest on his bank debt is $200 a week. If John's accounting profit is $1,000 per week, what is his economic profit?
- Consider the production schedule below. Where is the average product of labor maximized and at what point does diminishing marginal product of labor set in?
- Using regression analysis, where labor is the "X" variable, find the best production equation to estimate total output.
| output |
labor |
| 0 |
0 |
| 6 |
1 |
| 16 |
2 |
| 29 |
3 |
| 44 |
4 |
| 55 |
5 |
| 60 |
6 |
| 62 |
7 |
| 62 |
8 |
| 61 |
9 |
| 59 |
10 |