Question 01 A firm pays in cash $250000 in wages, $55430 in interest onborrowed

Question

Question 01
A firm pays in cash $250000 in wages, $55430 in interest onborrowed money capital and $74320 for the yearly rental of itsfactory building. If the entrepreneur worked for somebody else as amanager, he would earn at most $44500 per year and if he lent outhis money capital to somebody else in a similarly risky business,he would at most receive $16600 per year. Keeping in view the aboveinformation:
(A) Calculate:
a) The explicit cost of the firm.
b) The implicit cost of the firm.
c) The total cost of the firm.
(B) If the entrepreneur received $495680 from selling his yearsoutput, then calculate his total profit.
(C) What will be the total profit if the entrepreneur’s totalrevenue were $413934 instead?

Question: 2(A) Find the value of multiplierif:
a) MPC = 0.39
b) MPS = 0.64
(B) If the value of multiplier is 2.49 then find out:
a) MPC
b) MPS
(C) What is the relationship between the value of multiplier andMPC?
(D) Find the change in equilibrium level of output when there is a$25 increase in investment spending and the MPC is 0.75.

Explanation / Answer

if MPC decreases, K (Multiplier) will be weaker

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