(6) Costs, demand, and supply

Provide responses thatare both concise and preciseto the following short answer questions. Where appropriate, the use of diagrams is encouraged.

(a) Explain how accounting profit and economic profit are different.

(b) When does a cost become sunk?

(c) Using a demand and supply framework, and explaining each step in your logic, address the following:

(i) Describe the likely effects of a drop in the cost of employing skilled craftsmen on the market for fashionable shoes.

(ii) How might an increase in the cost of car insurance affect the US market for new cars? (iii) Global warming seems likely to increase migration from the south of the USA to the northern states. It also seems likely to decrease the need for insulation in the construction of houses in the northern states. Taking these assertions as given, how would the housing market in North Dakota be affected by global warming?

(iv) Mayor de Blasio wants to make all the taxis in New York electric vehicles by 2022. What effect will this have on the market for used cars in New York?