AnswersPersonal Finance - EL3403Case Study: Starting a Business

Case Study: Starting a Business Answers

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Sabrina’s Soccer produces soccer balls and soccer nets, which are sold at sporting goods stores. Which factors directly affect the company’s profit? Check all that apply.a stocking up on soccer cleats and uniformsa rise in the number of soccer leaguesa decrease in the cost of raw materialsthe opening of two sporting goods storesthe push for physical activities in schools

A
a stocking up on soccer cleats and uniforms
B
a rise in the number of soccer leagues
C
a decrease in the cost of raw materials
D
the opening of two sporting goods stores
E
the push for physical activities in schools
2
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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.
3

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.
4

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.
5

Standard of living is the level at which

A
producers sell certain goods.
B
consumers buy certain goods.
C
producers make desired goods.
D
consumers enjoy desired goods.
6

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
7

Read the results from a survey of consumers in Anytown. • Fourteen percent of participants desire a store that offers custom-made shoes.• Thirteen percent of participants plan to purchase a new phone in the next year.• Fifty-two percent of participants think an additional pizza place is needed.• Twenty-one percent of participants say they purchase bagels on a daily basis. Based on the survey data, what will occur if a new pizza place opens?

A
It will result in excess supply.
B
It will result in excess demand.
C
It will help to reduce the supply.
D
It will help to satisfy the demand.
8

The chart shows a production possibilities schedule for Sabrina’s Soccer. If Sabrina’s Soccer makes three nets, how many balls can the company produce?

Question illustration
A
2
B
4
C
6
D
8
9

The graph shows a production possibilities curve for Sabrina’s Soccer. At which two points will Sabrina’s Soccer produce the most equal amounts of soccer balls and soccer nets?

Question illustration
A
points A and B
B
points C and D
C
points E and F
D
points X and Y
10

The chart shows a production possibilities schedule for Sabrina’s Soccer. If the market for soccer balls is saturated and the market for soccer nets is open, which combination makes the most sense for Sabrina’s Soccer?

Question illustration
A
A
B
C
C
D
D
F
11

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
12

Profit equals the total amount of money made minus

A
the production cost.
B
the opportunity cost.
C
the revenue earned.
D
the price established.
13

The chart shows the marginal cost of producing soccer nets for Sabrina’s Soccer. What is the marginal cost of producing a fifth soccer net?

Question illustration
A
$1.00
B
$1.50
C
$2.00
D
$2.50
14

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.
15

The chart shows a production possibilities schedule for Sabrina’s Soccer. If the market for soccer balls is saturated and the market for soccer nets is open, which combination makes the most sense for Sabrina’s Soccer?

Question illustration
A
A
B
C
C
D
D
F
16

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.
17

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.
18

The chart shows a production possibilities schedule for Sabrina’s Soccer. If Sabrina’s Soccer makes three nets, how many balls can the company produce?

Question illustration
A
2
B
4
C
6
D
8
19

Which action would most likely help a producer maximize profit?

A
Keeping marginal revenue below marginal cost
B
Producing goods regardless of production cost
C
Monitoring the cost and revenue of additional units
D
Lowering prices until profit disappears

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