David is a detective in the Atlanta Police Department earning $75,000 per year. He is also an avid cook and people rave about his cooking. David hears of an opportunity to buy an existing restaurant . He needs to take $100,000 out of his brokerage truck to buy the restaurant. The $100,000 averaged a return of 10% over the last few years. Based on the recent history of the restaurant, he expects annual revenues of $400,000. He expects to spend $140,000 on food, $75,000 on employee expense, $50,000 on rent , and $25,000 for utilities each year. David is trying to decide whether to quit his job as a detective and buy the restaurant. Assuming that David is indifferent between being a detective and owning the restaurant, should David quit his job as a detective and buy the restaurant? Explain why or why not. David’s significant other reminds him that he LOVES being a detective and that he will miss being a detective if he decides to go into the restaurant business. After thinking about it, David values the positive aspects of being a detective at $50,000 per year . Given this new information, should David quit his job as a detective and buy the restaurant? Explain why or why not.
David is a detective in the Atlanta Police Department earning $75,000 per year. He is also an avid cook and people rave about his cooking. David hears of an opportunity to buy an existing restaurant . He needs to take $100,000 out of his brokerage truck to buy the restaurant. The $100,000 averaged a return of 10% over the last few years. Based on the recent history of the restaurant, he expects annual revenues of $400,000. He expects to spend $140,000 on food, $75,000 on employee expense, $50,000 on rent , and $25,000 for utilities each year. David is trying to decide whether to quit his job as a detective and buy the restaurant. Assuming that David is indifferent between being a detective and owning the restaurant, should David quit his job as a detective and buy the restaurant? Explain why or why not. David’s significant other reminds him that he LOVES being a detective and that he will miss being a detective if he decides to go into the restaurant business. After thinking about it, David values the positive aspects of being a detective at $50,000 per year . Given this new information, should David quit his job as a detective and buy the restaurant? Explain why or why not.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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David is a detective in the Atlanta Police Department earning $75,000 per year. He is also an avid cook and people rave about his cooking.
David hears of an opportunity to buy an existing restaurant . He needs to take $100,000 out of his brokerage truck to buy the restaurant. The $100,000 averaged a return of 10% over the last few years. Based on the recent history of the restaurant, he expects annual revenues of $400,000. He expects to spend $140,000 on food, $75,000 on employee expense, $50,000 on rent , and $25,000 for utilities each year.
David is trying to decide whether to quit his job as a detective and buy the restaurant.
- Assuming that David is indifferent between being a detective and owning the restaurant, should David quit his job as a detective and buy the restaurant? Explain why or why not.
- David’s significant other reminds him that he LOVES being a detective and that he will miss being a detective if he decides to go into the restaurant business. After thinking about it, David values the positive aspects of being a detective at $50,000 per year . Given this new information, should David quit his job as a detective and buy the restaurant? Explain why or why not.
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