Macroeconomics
Macroeconomics
13th Edition
ISBN: 9780134735696
Author: PARKIN, Michael
Publisher: Pearson,
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Chapter 10, Problem 2SPA
To determine

The calculation of the opportunity cost and economic profit.

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Joe runs a vegetable stall in the market building. Joe has no skills, no job experience, and no alternative employment. Entrepreneurs in the vegetable stall business earn $16,000 a year. Joe pays the rent of $2,500 a year, and his total revenue is $24,000 a year. He borrowed $1,000 at 20 percent a year to buy equipment. At the end of one year, Joe was offered $600 for his business and all its equipment. What are Joe's explicit costs, implicit costs, and economic profit? Joe's explicit costs are $ 2,700. Joe's implicit costs are $
Morgan took $400 000 out of their savings account to start an ice cream stand. The savings account paid 5% interest. In the first year, Morgan sold 12,000 batches of ice cream at a price of $3 each, and incurred costs of $12,000 which involved outlays of money. What was Morgan’s economic profit in the first year?
Please answer letter B.  Georgina is the owner and manager of a small café with monthly sales of 50,000 HK dollars and a monthly expenses of 42,500 HK dollars. Thus, having an accounting profit of 7,500 HK dollars. A. She could make 10,000 HK dollars a month somewhere else. She does, however, favor running the café. In fact, she would prefer to run the café than do anything else and would even pay up to 2,750 HK dollars per month. Is the café generating a profit, and should she continue running her business?  B. Suppose the cafe’s revenues and expenses stay the same, but Georgina can now earn 11,000 HK dollars per month somewhere else. Is the cafe still making a profit? Explain.
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