A grocery shop is owned by Mr. Moore and has the following statement of revenues and costs: Revenues $250,000 Supplies $25,000 Electricity $6,000 Employee salaries $75,000 Mr. Moore's salary $80,000 Mr. Moore always has the option of closing down his shop and renting out the land for $100,000. Also, Mr. Moore himself has job offers at a local supermarket at a salary of $95,000 and at a nearby restaurant at $65,000. He can only work one job, though. What are the shop's accounting costs? What are Mr. Moore's economic costs? Should Mr. Moore shut down his shop? Last year the accounting ledger for an owner of a small drug store showed the following information about her annual receipts and expenditures. She lives in a tax-free country (so don't worry about taxes). Revenues $1,000,000 Wages paid to hired labor (other than herself) $300,000 Utilities (fuel, telephone, water) $20,000 Purchases of drugs and other supplies for the store $500,000 Wages paid to herself $100,000 She pays a competitive wage rate to her workers, and the utilities and drugs and other supplies are all obtained at market prices. She already owns the building, so she has no cash outlay for its use. If she were to close the business, she could avoid all of her expenses, and, of course, would have no revenue. However, she could rent out her building for $200,000. She could also work elsewhere herself. Her two employment alternatives include working at another drug store, earning wages of $100,000, or working as a freelance consultant, earning $80,000. Determine her accounting profit and her economic profit if she stays in the drug store business. If the two are different, explain the difference between the two values you have calculated. A farmer uses three inputs to produce vegetables: land, capital, and labor. The production function for the farm exhibits diminishing marginal rate of technical substitution. a. In the short run the amount of land is fixed. Suppose the prices of capital and labor both increase by 5 percent. What happens to the cost-minimizing quantities of labor and capital for a given output level? Remember that there are three inputs, one of which is fixed. b. Suppose only the cost of labor goes up by 5 percent. What happens to the cost-minimizing quantity of labor and capital in the short run. A researcher claims to have estimated input demand curves in an industry in which the production technology involves two inputs, capital and labor. The input demand curves he claims to have estimated are L = wr?Q and K = w?rQ. Are these valid input demand curves? In other words, could they have come from a firm that minimizes its costs