$275/month the café rather than to recy- to run cle. Is the café making an econo
ID: 1218658 • Letter: #
Question
$275/month the café rather than to recy- to run cle. Is the café making an economic profit? Will John stay in the café business? Explain. Suppose the cafés revenues and expenses remain the same, but recyclers' earnings rise to $1100/ month. Is the café still making an economic profit? Explain. Suppose that instead of borrowing $10 000 at a monthly interest rate of 10 percent to buy equip- ment, John had invested $10 000 of his own money in equipment. How would your answers to parts (a) and (b) change? c. d. e. If John can earn $1000/month as a recycler and he likes recycling just as well as running the café, how much additional revenue would the café have to collect each month to earn a normal profit? 4. Suppose the city of Vancouver has 200 advertising companies, 199 of which employ designers of normalExplanation / Answer
Answer 4.
A)
He earns $100,000 + $500,000 = $600,000 (Normal salary of a designer + the economics rent he gets for his special talent)
The proportion of economic rent to his total salary = 500,000/ 600,000 = 5/6
B)
The advertising company for which Jacobs work cannot earn a economic profit because, if the company pays Jacobs less than 600,000 for his work and special abilities, other firms in the market will hire him at a higher price. So considering this any company would not be able to earn a economic profit from Jacob's talent.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.