Jaime owns and manages a café in Collegetown whose annual revenue is $5,000. Annual expenses are as follows: Labor Expense Food and drink Electricity Vehicle lease Rent Interest on loan for equipment Amount $2,000 500 100 150 500 1,000 a. Calculate Jaime's annual accounting profit. $ b. Suppose Jaime could earn $1,000 per year as a recycler of aluminum cans, but she prefers to run the café. In fact, she would be willing to pay up to $275 per year to run the café rather than to recycle. Is the café making an economic profit? , (Click to select) the café is making an economic (Click to select) of $ Should Jaime stay in the cafe business? (Click to select) per year. c. Suppose the café's revenues and expenses remain the same, but recyclers' earnings rise to $1,100 per year. Is the café making an economic profit? (Click to select) ✓ the café is making an economic (Click to select) of $ per year. Should Jaime stay in the café business? (Click to select) d. Suppose Jaime had not had gotten a $10,000 loan at an annual interest rate of 10 percent to buy equipment, but instead had invested $10,000 of her own money in equipment. Calculate Jaime's annual accounting profit. $ e. As in part b, suppose Jaime could earn $1,000 per year as a recycler and she has to pay $1,000 per year in interest on her loan, but, unlike part b, suppose Jaime likes recycling just as well as running the café. How much additional revenue would the café have to collect each year to earn a normal profit? $
Jaime owns and manages a café in Collegetown whose annual revenue is $5,000. Annual expenses are as follows: Labor Expense Food and drink Electricity Vehicle lease Rent Interest on loan for equipment Amount $2,000 500 100 150 500 1,000 a. Calculate Jaime's annual accounting profit. $ b. Suppose Jaime could earn $1,000 per year as a recycler of aluminum cans, but she prefers to run the café. In fact, she would be willing to pay up to $275 per year to run the café rather than to recycle. Is the café making an economic profit? , (Click to select) the café is making an economic (Click to select) of $ Should Jaime stay in the cafe business? (Click to select) per year. c. Suppose the café's revenues and expenses remain the same, but recyclers' earnings rise to $1,100 per year. Is the café making an economic profit? (Click to select) ✓ the café is making an economic (Click to select) of $ per year. Should Jaime stay in the café business? (Click to select) d. Suppose Jaime had not had gotten a $10,000 loan at an annual interest rate of 10 percent to buy equipment, but instead had invested $10,000 of her own money in equipment. Calculate Jaime's annual accounting profit. $ e. As in part b, suppose Jaime could earn $1,000 per year as a recycler and she has to pay $1,000 per year in interest on her loan, but, unlike part b, suppose Jaime likes recycling just as well as running the café. How much additional revenue would the café have to collect each year to earn a normal profit? $
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Jaime owns and manages a café in Collegetown whose annual revenue is $5,000. Annual expenses are as follows:
Labor
Expense
Food and drink
Electricity
Vehicle lease
Rent
Interest on loan for equipment
Amount
$2,000
500
100
150
500
1,000
a. Calculate Jaime's annual accounting profit. $
b. Suppose Jaime could earn $1,000 per year as a recycler of aluminum cans, but she prefers to run the café. In fact, she would be
willing to pay up to $275 per year to run the café rather than to recycle. Is the café making an economic profit?
,
(Click to select) the café is making an economic (Click to select)
of $
Should Jaime stay in the cafe business? (Click to select)
per year.
c. Suppose the café's revenues and expenses remain the same, but recyclers' earnings rise to $1,100 per year. Is the café making an
economic profit?
(Click to select)
✓
the café is making an economic (Click to select) of $
per year.
Should Jaime stay in the café business? (Click to select)
d. Suppose Jaime had not had gotten a $10,000 loan at an annual interest rate of 10 percent to buy equipment, but instead had
invested $10,000 of her own money in equipment.
Calculate Jaime's annual accounting profit. $
e. As in part b, suppose Jaime could earn $1,000 per year as a recycler and she has to pay $1,000 per year in interest on her loan, but,
unlike part b, suppose Jaime likes recycling just as well as running the café.
How much additional revenue would the café have to collect each year to earn a normal profit? $
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