A Barber Currently Cuts Hair for 50 Clients Per Week

question 26

Multiple Choice

A barber currently cuts hair for 50 clients per week and earns a profit.He is considering expanding his operation in order to serve more clients.Should he expand?

• A)Yes,because cutting hair is profitable.
• B)No,because he may not be able to sell more services.
• C)It depends on the marginal cost of serving more clients and the marginal revenue he will earn from serving more clients.
• D)It depends on the average cost of serving more clients and the average revenue he will earn from serving more clients.

Analyze the effects of price changes on consumer demand through the substitution and income effects.

Define and identify Giffen goods and their characteristics.

Understand the concepts of homothetic preferences and their implications for consumer demand.

Interpret the compensated demand function and its relevance to consumer theory.

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Definitions:

Frequency Tabulation

A statistical method for organizing data into a table to show how often each different value occurs.

Tchebysheff's Theorem

A statistical theorem that provides a bound on the probability that the value of a random variable deviates from its mean by more than a certain multiple of its standard deviation.

Standard Deviations

Measures the amount of variation or dispersion from the mean in a set of data points.

Empirical Rule

A statistical rule stating that for a normal distribution, nearly all data will fall within three standard deviations (denoted as sigma) of the mean.