Sven runs a daycare for some of the neighborhood children, where he earns $300/day in revenue. He runs the daycare out of his home, for which the mortgage costs $3,000 per month ($100 per day). Each day, Sven spends $50 on food, diapers, and other supplies. He also has some toys and playground equipment that originally cost $500, but which he wouldn’t get any money for reselling today. Sven looks after all the children himself, so he doesn’t pay any money in labor costs. If he weren’t busy with the daycare, he could earn $120 per day as a private nanny
Sven runs a daycare for some of the neighborhood children, where he earns $300/day in
revenue. He runs the daycare out of his home, for which the mortgage costs $3,000 per month
($100 per day). Each day, Sven spends $50 on food, diapers, and other supplies. He also has
some toys and playground equipment that originally cost $500, but which he wouldn’t get
any money for reselling today. Sven looks after all the children himself, so he doesn’t pay any
money in labor costs. If he weren’t busy with the daycare, he could earn $120 per day as a
private nanny. What is Sven’s daily economic profit from the daycare? (Select one from below)
(a) $300: Economic profit is equal to revenue.
(b) $180: That is his revenue minus
(c) $150: That is his revenue minus input cost.
(d) $130: That is his revenue minus variable cost.
(e) $50: That is his revenue minus accounting cost.
(f) $30: That is his revenue minus economic cost.
(g) $0: In the long run, all firms must make zero profits.
(h) –$200: That is his revenue minus fixed cost.
(i) It is impossible to tell without knowing the opportunity cost of child care on the market.
(j) It is impossible to tell without knowing the daily cost-equivalent of the toys
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