You are thinking about opening a business. If you do, you will have to leave your current job, which pays $2500 month (you may assume you can always find alternative employment in this line of work, for the same pay). You anticipate your monthly revenues to be $8,300. Your operating costs include: $700 in rent for equipment, which is done on a month-to-month and can be cancelled at any time. . $1,200 to your workers in wages for the month. • $300 for the supplies you used that month You sign a one-year lease agreement for the office space, which comes to $24,000 a year and is paid in total, in advance. To help you out with your business, your uncle has lent you the $24,000 for the lease which you will pay back at the end of the year at 4% interest. You may assume you like your current work and the new business equally as well - that is, there are no non-pecuniary benefits for either line of work. PART A. The annual explicit cost of starting this business is dollars. dollars. PART B. The annual opportunity cost of starting this business is PART C. After signing the leasing arrangement and taking the loan from your uncle, your explicit fixed costs associated with this business is dollars. PART D. The annual economic surplus (profit) if you start this business is dollars.
You are thinking about opening a business. If you do, you will have to leave your current job, which pays $2500 month (you may assume you can always find alternative employment in this line of work, for the same pay). You anticipate your monthly revenues to be $8,300. Your operating costs include: $700 in rent for equipment, which is done on a month-to-month and can be cancelled at any time. . $1,200 to your workers in wages for the month. • $300 for the supplies you used that month You sign a one-year lease agreement for the office space, which comes to $24,000 a year and is paid in total, in advance. To help you out with your business, your uncle has lent you the $24,000 for the lease which you will pay back at the end of the year at 4% interest. You may assume you like your current work and the new business equally as well - that is, there are no non-pecuniary benefits for either line of work. PART A. The annual explicit cost of starting this business is dollars. dollars. PART B. The annual opportunity cost of starting this business is PART C. After signing the leasing arrangement and taking the loan from your uncle, your explicit fixed costs associated with this business is dollars. PART D. The annual economic surplus (profit) if you start this business is dollars.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:QUESTION 3
You are thinking about opening a business. If you do, you will have to leave your current job, which pays $2500 month (you may assume you can always find
alternative employment in this line of work, for the same pay). You anticipate your monthly revenues to be $8,300. Your operating costs include:
$700 in rent for equipment, which is done on a month-to-month and can be cancelled at any time.
$1,200 to your workers in wages for the month.
$300 for the supplies you used that month
You sign a one-year lease agreement for the office space, which comes to $24,000 a year and is paid in total, in advance. To help you out with your business,
your uncle has lent you the $24,000 for the lease which you will pay back at the end of the year at 4% interest.
You may assume you like your current work and the new business equally as well - that is, there are no non-pecuniary benefits for either line of work.
PART A. The annual explicit cost of starting this business is
dollars.
PART B. The annual opportunity cost of starting this business is
dollars.
PART C. After signing the leasing arrangement and taking the loan from your uncle, your explicit fixed costs associated with this business is
dollars.
PART D. The annual economic surplus (profit) if you start this business is
dollars.
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