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Practice problem #1

 

Joe's ice cream store has to decide whether to shut down this winter or stay

open.  His projected revenue is $1,200 per week.  He has fixed costs (Mortgage, taxes, insurance, etc.) that average $800 per week. His total cost of operating the business is $1,500 per week. 

 

Should he stay open or close down this winter.  Use your fabulous economic reasoning to arrive at an answer.  If you get it right, Joe will give you all the Heavenly Hash you want.

 

 

 

 

 

 

 

 

 

 

            

 

 

 

 

 

Practice problem #2

 

Joe's ice cream store has to decide whether to shut down this winter or stay open.  His projected revenue is $1,300 per week.  He has fixed costs (Mortgage, taxes, insurance, etc.) that average $1,200 per week. His total cost of operating the business is $2,700 per week. 

 

Should he stay open or close down this winter.  Use your fabulous economic reasoning to arrive at an answer.  If you get it right, Joe will give you all the Marshmallow Crunch you want.

 

 

 

 













 

1. Igora's pizzeria wants to know if it should stay open this spring.  Total Revenue will be $12,000 per week and Total Cost will be 18,000 per week.  The fixed cost of running the business is $4,000 per week.  Should the pizzeria stay open or shut down temporarily? Defend your answer.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2.Nomi's bagel shop is in the same geographical area as Igora's pizzeria.  He wants to know if he should shut down.  His Total Revenue is $10,000 per week and his total cost is $13,000 per week.  His variable cost is $9,000 per week.  What should he do and why.

 

 

 

 

 

 

 

 

 

 

 

 

 Larry's Golf shop wants to know if it should stay open this winter.  Total Revenue will be $24,000 per week and Total Cost will be $29,000 per week.  The fixed cost of running the business is $9,000 per week.  Should the Golf store stay open or shut down temporarily? Defend your answer.

 

 

 

 

 

 

 

 

Bock's House of Cards is in the same geographical area as Larry's Golf Shop.  He wants to know if he should shut down.  His Total Revenue is $25,000 per week and his total cost is $35,000 per week.  His variable cost is $26,000 per week.  What should he do and why.

 

 

 

 

 

 

Madeuch's new restaurant is one of many identical Italian restaurants in Pejing, China.  He is cooking traditional Italian food and people are not coming at his restaurant or the other traditional Italian restaurants.  They are losing money each week. He has 20 tables and it is not very costly to set up this type of restaurant. He is earning less money than his last job---pig butcher at Madeline's butcher shop outside of Palermo.

 

What type of market structure is represented in this example.  Defend your answer.

 

 

 

 

 

 

 

 

 

Will Madeuch earn long run economic losses?  Why or why not?

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