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Case Study: Starting a Business Answers

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1
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A survey of hobbies and purchases can help a producer

A
assess demand to choose a business.
B
identify the marginal benefit to make a profit.
C
decide the production costs to make a good.
D
determine the remaining supply to lower costs.
2
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The chart shows a production possibilities schedule for Sabrina’s Soccer. Which statement correctly explains the chart?

Question illustration
A
The opportunity cost of producing one soccer net is eight soccer balls.
B
The opportunity cost of producing two soccer nets is two soccer balls.
C
The opportunity cost of producing two soccer balls is one soccer net.
D
The opportunity cost of producing four soccer balls is three soccer nets.
3

Read the factors of production for two businesses: In Case manufactures cases for smart phones, while Wrap It Up is a gift-wrapping service. In Case• $1,500 a month for rented building• Will need two new employees• $2,000 for inventory expenses• $4,500 for equipment expenses Wrap It Up • $1,500 a month for a rented store• Will need five new employees• $1,500 for inventory expenses• $2,500 for equipment expensesWhich statement correctly compares the two businesses?

A
In Case will require a less costly investment in labor, while Wrap It Up will require less capital in the long term.
B
In Case will require less capital in the long term, while Wrap It Up will require a less costly investment in labor.
C
In Case will require a more costly investment in land, while Wrap It Up will have higher inventory costs.
D
In Case will have higher inventory costs, while Wrap It Up will require a more costly investment in land.
4

The chart shows the revenue from selling soccer nets for Sabrina’s Soccer. How much profit does the company make from producing and selling four soccer nets?

Question illustration
A
$51
B
$80
C
$109
D
$137
5

The graph shows the average household income for a community named Anytown. Anytown households that earn more than $75,000 tend to buy sports equipment, while households that earn less than $75,000 tend to buy TVs. Which new business would be most likely to succeed?

Question illustration
A
a car dealership
B
an electronics store
C
an office supply store
D
a sporting goods store
6

The chart shows a production possibilities schedule for Sabrina’s Soccer. Stan’s Sporting Goods is a competitor that can manufacture seven soccer balls out of a possible ten, if it makes one soccer net. Which statement correctly compares the two businesses?

Question illustration
A
Sabrina’s Soccer has a comparative advantage over Stan’s Sporting Goods because Sabrina’s Soccer has a lower opportunity cost.
B
Stan’s Sporting Goods has a comparative advantage over Sabrina’s Soccer because Stan’s Sporting Goods has a lower opportunity cost.
C
Sabrina’s Soccer has an absolute advantage over Stan’s Sporting Goods because Sabrina’s Soccer has a lower production cost.
D
Stan’s Sporting Goods has an absolute advantage over Sabrina’s Soccer because Stan’s Sporting Goods has a lower production cost.
8

What is the difference between absolute advantage and comparative advantage?

A
Absolute advantage is the ability to produce a good or a service at a lower production cost than competitors. Comparative advantage is the ability to produce a good or service at a lower opportunity cost than competitors.
B
Absolute advantage is the ability to produce a good or a service at a lower opportunity cost than competitors. Comparative advantage is the ability to produce a good or service at a lower production cost than competitors.
C
Absolute advantage is the ability to sell a good or a service at a lower price than competitors. Comparative advantage is the ability to sell a good or service at a higher price than competitors.
D
Absolute advantage is the ability to sell a good or a service at a higher price than competitors. Comparative advantage is the ability to sell a good or service at a lower price than competitors.
9

The graph shows the marginal cost of producing soccer cleats for Sabrina’s Soccer. At which level of production does the company make the least profit?

Question illustration
A
the first pair of cleats
B
the second pair of cleats
C
the third pair of cleats
D
the fourth pair of cleats
10

The graph shows a production possibilities curve for Sabrina’s Soccer. At which point on the graph are resources not used efficiently?

Question illustration
A
point A
B
point F
C
point X
D
point Y

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