Arlene Makes Earrings in the Shape of the Mascot of a Local

question 263

Multiple Choice

Arlene makes earrings in the shape of the mascot of a local university. Last year, Arlene made 250 pairs of earrings, which she sold to the university bookstore for $10 each. Arlene works out of her home; her only cost is $3 per pair of earrings for materials and $85 for tax help. If Arlene did not produce earrings, she would spend her time babysitting her nephews and make about $500 per year. Which statement is TRUE?

• A) Arlene's economic profit is $1,665.
• B) Arlene's total revenue is $2,500.
• C) Arlene's total implicit costs are $835.
• D) Arlene's accounting profit is $1,165.

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Definitions:

Purchase Quantity

The number of units of a product that consumers buy over a specified period.

Tornado Chart

A graphical method used to display the sensitivity of a result to changes in its input variables, usually in the form of a horizontal bar chart.

NPV

Net Present Value, a calculation used to assess the profitability of an investment, representing the difference between the present value of cash inflows and outflows over a period of time.

Market Size

An estimation of the total volume of goods or services that is available for purchase within a specific market.