1.Jane has compiled the following list of expenses after completing one year of college. Assume that Jane would be living with her parents and working if she weren't attending college. Use this information to calculate Jane's economic cost of attending college for one year.

Tuition$8,000

Dormitory room4,000

Books and supplies1,000

Food plan3,000

Foregone income19,000

Entertainment expenses1,000

Clothing2,000

Health insurance1,000

2.Before Sarah quit her job as a carpenter, she was earning $35,000 per year. She rented a building for $12,000 per year and opened a cabinet shop. She spends $148,000 per year for labor, materials, utilities, and advertising.

(i)How much revenue will the business have to earn in order to break even in terms of business profit?

(ii)How much revenue will the business have to earn in order to break even in economic terms?

3.Climate Control Devices, Inc. estimates that sales of defective thermostats cost the firm an average of 25 each for replacement or repair. An independent engineering consultant has recommended hiring quality control inspectors so that defective thermostats can be identified and corrected before shipping. The following schedule shows the expected relation between the number of quality control inspectors and the thermostat failure rate, defined in terms of the percentage of total shipments that prove to be defective.

Number of Quality Control Inspectors

Thermostat Failure Rate (percent)

0

5.0

1

4.0

2

3.2

3

2.6

4

2.2

5

2.0

The firm expects to ship 250,000 thermostats during the coming year, and quality control inspectors each command a salary of 30,000 per year.

i.Construct a table showing the marginal failure reduction (in units) and the value of these reductions (in ) for each inspector hired.

ii.How many inspectors should the firm hire?

iii.How many inspectors would be hired if additional indirect costs (lost customer goodwill and so on) were to average 30% of direct replacement or repair costs?

4. The demand for housing is often described as being highly cyclical, and very sensitive to housing prices and interest rates.Given these characteristics, describe the effect of each of the following in terms of whether it would increase or decrease the quantity demanded or the demand for housing. Moreover, when price is expressed as a function of quantity, indicate whether the effect of each of the following is an upward or downward movement along the given demand curve or instead involves an outward or inward shift in the relevant demand curve for housing. Explain your answers.

i.An increase in housing prices

ii.A fall in interest rates

iii.A rise in interest rates

iv.A severe economic recession

v.A robust economic growth (expansion)

vi.A rule that bank should offer loan based on net income rather than gross income.