Harvey Quit His Job at State University, Where He Earned

question 382

Multiple Choice

Harvey quit his job at State University, where he earned $45,000 a year. He figures his entrepreneurial talent or forgone entrepreneurial income to be $5,000 a year. To start the business, he cashed in $100,000 in bonds that earned 10 percent interest annually to buy a software company, Extreme Gaming. In the first year, the firm sold 11,000 units of software at $75 for each unit. Of the $75 per unit, $55 goes for the costs of production, packaging, marketing, employee wages and benefits, and rent on a building.The implicit costs of Harvey's firm in the first year were

• A)$220,000.
• B)$60,000.
• C)$105,000.
• D)$825,000.

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Definitions:

Productive Efficiency

A situation where the economy or an enterprise is producing goods and services at the lowest possible cost.

Maximum Possible Output

Refers to the highest level of production an economy can sustain over a period without increasing inflation, often determined by available resources and technology.

Productive Efficiency

A situation in which an economy or entity is operating in such a way that it cannot produce more of one good without producing less of another.

U.S. Economy

The economic system of the United States, characterized by private enterprise, a variety of industries, and is considered one of the largest and most influential economies in the world.