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Problem Set Six
Name
_____________________
Chapter 8
3. John Jones owns and manages a café whose monthly revenue is $5,000. Monthly expenses are:
Labor
$2,000
Food and drink
500
Electricity
100
Vehicle lease
150
Rent
500
Interest on loan for equipment
1,000
a. Calculate John’s monthly accounting profit.
b. John could earn $1,000 a month elsewhere. However, he prefers to run the café. In fact, he
would be willing to pay up to $275 per month to run the café rather than do anything else. Is the
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Unformatted text preview: café making an economic profit? Should John stay in the café business? Explain. c. Suppose the cafe’s revenues and expenses stay the same, but John can now earn $1,100 a month elsewhere. Is the café still making an economic profit? Explain. d. Suppose John had not gotten a loan to buy equipment, but had invested his own money. How would your answers to parts a and b change?...
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- Spring '08
- BRIGHTWELL
- Income Statement, John Jones
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