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E202ProblemSet6.1

# E202ProblemSet6.1 - café making an economic profit Should...

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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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