Please answer all questions and hand in your anewers on paper or electronically

Question

Please answer all questions and hand in your anewers on paper or electronically uning the sssignment fenture on Blackboard before class on November 1. This ssignment aasesses learning outcomes 2 and 3 from the syllabus and draws on chapters 6 and 9 from the text. 1. All your life, you have dreamed of operating a bike store, and now you do. You own the storefront you operate in, which is curiously zoned to allow any business usage. You earn revenue of $200,000 per year from your sales. It costs you $100,000 per year to obtain the bikes. You pay $20,000 per year for electricity, taxes, and other expenos. If you did not run the bike store, you would be an accountant and receive a yearly salary of $40,000. In fact, you could go be an accountant now, if you wanted- you have a standing job offer. (a) Calculate your current accounting profit (b) Caleulate your current economic profit. (c) Which costs are implicit and which are explicit? (d) Chipotle contacts you. They offer to pay you $50,000 per year to take over your storefront space. Now, what is your accounting profit? (e) With the Chipotle offer, what is your economic profit? (f) Should you accept Chipotle's offer? Why or why not? DEMAND FOR SLIDERS 18 0.6 1 QUANTITY ISLIDE SPER DAY 2 See the graph of demand for sliders. (Sliders are very small hamburgets, similar to those served at White Caste. Note that all quantities are multiple·of 10. For each range lek w, use the midpoint formula to calenlate the price-elastieity of demand along the listed range: state whether demand is elastie, inelastic, or unit-clastic: and describe what happens to revene when the price risis from the lower of the two prices to the higher of the two priers. Rauges: $0.20 to S0.10 s0 s0 to $1.20 81.60o

Explanation / Answer

1. Accounting profit = 200,000 - 100,000 - 20,000 = $80,000

2. Economic profit = 80,000 - 40,000 = $40,000

3. Implicit costs: Opportunity cost = wages foregone = $40,000

Explicit costs: Direct production costs = 100,000 + 20,000 = $120,000

4. Accounting profit remains unchanged

5. Economic profit = 80,000 - 50,000 = $30,000

6. No

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