2. A student foregoes her annual summer job (paying in total $3,200) in order to operate a sandwich shop. Rent and other fixed costs are $1,500 for the entire season. Variable cost per sandwich is $0.50. a) What is the opportunity cost for the student? Explain. b) Derive the expressions for the total accounting cost and total economic cost. c) Suppose that the sandwich shop generates a positive total accounting profit of $2,000. Accounting for total economic costs, should the student operate the shop? Explain.
2. A student foregoes her annual summer job (paying in total $3,200) in order to operate a sandwich shop. Rent and other fixed costs are $1,500 for the entire season. Variable cost per sandwich is $0.50. a) What is the opportunity cost for the student? Explain. b) Derive the expressions for the total accounting cost and total economic cost. c) Suppose that the sandwich shop generates a positive total accounting profit of $2,000. Accounting for total economic costs, should the student operate the shop? Explain.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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2. A student foregoes her annual summer job (paying in total $3,200) in order to operate a sandwich shop. Rent and other fixed costs are $1,500 for the entire season. Variable cost per sandwich is $0.50.
a) What is the opportunity cost for the student? Explain.
b) Derive the expressions for the total accounting cost and total economic cost.
c) Suppose that the sandwich shop generates a positive total accounting profit of $2,000. Accounting for total economic costs, should the student operate the shop? Explain.
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