1. Definition of economic costs Bob lives in San Diego and operates a small company selling bikes. On average, he receives $778,000 per year from selling bikes. Out of this revenue from sales, he must pay the manufacturer a wholesale cost of $452,000. He also pays several utility companies, as well as his employees wages totaling $237,000. He owns the building that houses his storefront; if he choose to rent it out, he would receive a yearly amount of $3,000 in rent. Assume there is no depreciation in the value of his property over the year. Further, if Bob does not operate the bike business, he can work as a nurse and earn a yearly salary of $32,000 with no additional monetary costs, and rent out his storefront at the $3,000 per year rate. There are no other costs faced by Bob in running this bike company. Identify each of Bob's costs in the following table as either an implicit cost or an explicit cost of selling bikes. Implicit Cost Explicit Cost "he rental income Bob could receive if he chose to rent out his showroom O 0 "he salary Bob could earn if he worked as a nurse 0 0 "he wholesale cost for the bikes that Bob pays the manufacturer 0 O "he wages that Bob pays 0 O Complete the following table b y determining Bob's accounting and economic profit of his bike business. Prot (Dollars) Accounting Prot \\:| Economic Prot \\:| 2. Inputs and outputs Iyana's Pizzas is a takeoutonly pizza parlor servicing the college campus of Syracuse that specializes in vegan pizzas. Iyana's small shop has barely enough room for customers to stand and wait, let alone the four pizza ovens necessary to keep up with the hungry student customers. Iyana signed a lease renting both the four ovens and the storefront for the next year. Due to the terms of the lease and the building's size constraint, Iyana is unable to change the store's number of pizza ovens in the short run. However, Iyana does face a decision regarding the number of employees to schedule on a weekly basis. Every Sunday, Iyana contacts the staff to communicate the amount of workers needed on each day of the upcoming week. In the short run, the store employees are V inputs, and pizza ovens are V inputs. The following table presents Iyana's daily production schedule. Fill in the blanks to complete the Marginal Product of Labor column for each worker: Labor Output Marginal Product of Labor (Number of workers) (Pizzas) (Pizzas) 0 O 60 100 130 150 UUUUU U'IAUJNH 160 However, Iyana does face a decision regarding the number of employees to schedule on a weekly basis. Every Sunday, Iyana contacts the staff to communicate the amount of workers needed on each day of the upcoming week. In the short run, the store employees are V inputs, and pizza ovens are V inputs. The following table presents Iyana's daily production schedule. However, Iyana does face a decision regarding the number of employees to schedule on a weekly basis. Every:r Sunday, Iyana contacts the staff to communicate the amount of workers needed on each day.r of the upcoming week. In the short run, the store employees are V inputs, and pizza ovens are V inputs. xed variable The following ta 3 Iyana's daily;r production schedule. Fill in the blanks to complete the Marginal Product of Labor column for each worker. Labor Output Marginal Product of Labor (Number of workers) (Pizzas) (Pizzas) O 60 100 WJ 130 4 150 5 160On the following graph, plot Iyana's production function using the green points (triangle symbol). Note: Plot your points in the order in which you would like them connected. Line segments will connect the points automatically. Hint: Be sure to plot the first point at (0, 0). 200 A 180 Production Function 160 140 120 100 QUANTITY OF OUTPUT (Pizzas) 80 60 40 20 0 0 2 3 LABOR (Number of workers) Suppose that Iyana's only variable cost is labor. Assume that Iyana faces daily fixed costs of $20 and pays all workers the same daily wage of $30.Use the orange points (square symbol) to plot Iyana's total cost curve on the following graph using the quantities from the preceding table. 200 180 Total Cost 160 140 120 100 TOTAL COST ( Dollars) 80 60 40 20 0 20 40 60 80 100 120 140 160 180 200 QUANTITY OF OUTPUT (Pizzas) True or False: The shape of the production function reflects the law of increasing marginal returns. O True O False