Ally Owns a Shoe Store

question 21

Multiple Choice

Ally owns a shoe store. The market wage is $10 per hour, and the cost of capital is $2 per week for every $1000, of capital borrowed. Consider the isocost line associated with spending $8000, per week, and let the y-axis be the amount of capital borrowed in increments of $1000. Which of the following is not true?

• A) If Ally borrows no capital, she can employ 800 hours of work.
• B) If Ally employs no workers, she can borrow $4 million of capital.
• C) If Ally employs 600 hours of work, she can borrow $1 million of capital.
• D) If Ally employs 400 hours of work, she can borrow $3 million of capital.
• E) The slope of the isocost line is −5.

---

Definitions:

Privity of Contract

A doctrine in contract law that prohibits any person who is not a party to a contract from enforcing or being bound by the terms of that contract.

Legally Enforce

The capability to impose compliance or execution of a law, agreement, or obligation through legal processes or judicial intervention.

Assignee

A person to whom an assignment is made.

Obligor

In contract law, the party who is obligated to deliver on a promise or to undertake some act.