Problem Set 6

Problem Set 6 - Chapter 9, 10 This problem set is due on...

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1 Chapter 9, 10 This problem set is due on Wednesday, Oct. 21. Please turn it in before we start the class. Late submissions will not be accepted. 1. Sally is considering opening her own beauty salon. She anticipates the following costs per year: Furniture: $20,000 Equipment: $14,000 Rent: $12,000 Coloring products: $6,000 Styling products: $4,000 Sally is withdrawing $34,000 from her savings account that pays 4% interest/year to purchase the furniture and equipment; she will quit her current job that pays $25,000 per year. She expects total revenues from the new business in the first year to be $70,000. Calculate the following: a. Explicit cost (list by item). b. Implicit cost (list by item). c. Accounting profit. d. Economic profit. e. Given this first-year information only, should Sally open a salon?
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2. A firm faces the following long-run total cost curve and is deciding what size factory to build. Refer to the graph below to answer the following questions:
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This note was uploaded on 11/04/2009 for the course ECON 201 taught by Professor Williams during the Fall '08 term at UVA.

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Problem Set 6 - Chapter 9, 10 This problem set is due on...

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