Darlene Runs a Fruit and Vegetable Stand in a Medium-Sized

question 30

Multiple Choice

Darlene runs a fruit and vegetable stand in a medium-sized community where there are many such stands. Her weekly total revenue equals $3500. Her weekly total cost of running the stand equals $3500, consisting of $2500 of variable costs and $1000 of fixed costs. What would an economist likely advise Darlene to do?

• A) Shut down as quickly as possible, because the stand is generating losses.
• B) Keep the stand open for a while longer, because she is covering all of her variable costs and some of her fixed costs.
• C) Keep the stand open, because it is generating a normal profit.
• D) Keep the stand open for a while longer, because she is covering all of her fixed costs and some of her variable costs.

Understand the relationship between price changes and changes in quantity demanded or supplied.

Explain the concept of cross-price elasticity and its implications for goods being substitutes or complements.

Calculate price elasticity of demand using the midpoint method.

Understand the characteristics and benefits of organic and mechanistic organizational designs.

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Definitions:

Reward-To-Volatility Ratio

A measure used in finance to assess the return of an investment relative to its risk, with higher ratios indicating better risk-adjusted returns.

Standard Deviation

A statistical measure of the dispersion or variability of a set of data points, often used in finance to gauge the volatility of an investment.

Expected Return

The weighted average of all possible returns for an investment, factoring in the probabilities of each outcome.

Risky Asset

An asset that has a significant degree of risk associated with it, meaning there is a higher chance of losing some or all of the original investment.