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For the part B, on opportunity cost, should the 200k be added to (0.06*200k) again in addtion to all other forgone altenative? Kindly explain.

For the part B, on opportunity cost, should the 200k be added to (0.06*200k) again in addtion to all other forgone altenative? Kindly explain.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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For the part B, on opportunity cost, should the 200k be added to (0.06*200k) again in addtion to all other forgone altenative? Kindly explain.

合日 Document1 Q. Search in Document Home Insert Draw Design Layout References Mailings Review View + Share a A. A- E -E - E , E E Times New R... - AaBbCcDc AaBbCcDdEe AaBb( AabbCcDdEe AaBbCcDdEe AaBbCcDdEe AgBbCcDdEe AgBbCcDdEe Paste в I U - abe X, x2 Normal Heading 1 Subtle Emph.. Emphasis Styles Pane No Spacing Heading 2 Title Subtitle You are considering opening your own restaurant. To do so, you will have to quit your current job, which pays $46k per year, and cash in your life savings of $200k, which have been in a certificate of deposit paying 6% per year. You will need this $200k to purchase equipment for your restaurant operations. You estimate that you will have to spend $4k during the year to maintain the equipment so as to preserve its market value at $200k. Fortunately, you own a building suitable for the restaurant. You currently rent out this building on a month-by-month basis for $2,500 per month. You anticipate that you will spend $50k for food, $40k for extra help, and $14k for utilities and supplies during the first year of operations. There are no other costs involved in this business. We want to know how much revenue your restaurant must bring in order to have positive economic profits. a. What is your direct cost (or explicit cost) of operating the restaurant during the first year? b. What is your opportunity cost (or implicit cost) of operating the restaurant during the first year? Page 1 of 1 189 words English (United States) O Focus 190%
Transcribed Image Text:合日 Document1 Q. Search in Document Home Insert Draw Design Layout References Mailings Review View + Share a A. A- E -E - E , E E Times New R... - AaBbCcDc AaBbCcDdEe AaBb( AabbCcDdEe AaBbCcDdEe AaBbCcDdEe AgBbCcDdEe AgBbCcDdEe Paste в I U - abe X, x2 Normal Heading 1 Subtle Emph.. Emphasis Styles Pane No Spacing Heading 2 Title Subtitle You are considering opening your own restaurant. To do so, you will have to quit your current job, which pays $46k per year, and cash in your life savings of $200k, which have been in a certificate of deposit paying 6% per year. You will need this $200k to purchase equipment for your restaurant operations. You estimate that you will have to spend $4k during the year to maintain the equipment so as to preserve its market value at $200k. Fortunately, you own a building suitable for the restaurant. You currently rent out this building on a month-by-month basis for $2,500 per month. You anticipate that you will spend $50k for food, $40k for extra help, and $14k for utilities and supplies during the first year of operations. There are no other costs involved in this business. We want to know how much revenue your restaurant must bring in order to have positive economic profits. a. What is your direct cost (or explicit cost) of operating the restaurant during the first year? b. What is your opportunity cost (or implicit cost) of operating the restaurant during the first year? Page 1 of 1 189 words English (United States) O Focus 190%
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