Business Scenario: The students met the person who operated an ice cream bar business in this building the previous summer. He told them last summer he charged $3.00 per ice cream bar and sold 9,000 ice cream bars. He said the cost of the ice cream barswholesale purchase, delivery, storage, and so oncomes to about $0.60 per bar. He indicated his other main costsleasing the building, license, local business association fee, and insurancecame to about $8,000.

Based on this analysis, the students are confident the summer business venture can make money. They approach the owner of the building and learn that if they want to reserve the right of first option to lease the building over the summer, they will need to make a non-refundable $3,000 deposit that will be applied to the lease. They proceeded to make that deposit.

A few weeks later, all three students were unexpectedly offered summer business internships. Each student would earn $5,000. However, the work site for the internships is far from the beach and they would be in an office all day. They now must decide whether to accept the internships and terminate their plan to run a business at the beach or turn down the internships.

We will consider a simple demand curve for the ice cream venture. We will assume that since the operator of the business last year sold 9,000 units at a price of $3.00 that we could sell up to 9,000 units at the same price this coming summer. Next, suppose the students had asked the prior operator how many ice cream bars he believes he would have sold at a price of $4.00 and the prior operator responds that he probably would have sold 2,500 fewer ice cream bars. In other words, he estimates his sales would have been 6,500 at a price of $4.00 per ice cream bar.

To develop a demand curve from the prior operator's estimates, the students assume that the relationship between price and quantity is linear, meaning that the change in quantity will be proportional to the change in price. Graphically, you can infer this relationship by plotting the two price-quantity pairs on a graph and connecting them with a straight line. Using intermediate algebra, you can derive an equation for the linear demand curve P = 6.6 *****Q.

The following should be included in your analysis:

a)Compute the economic profit. Explain difference between economic and accounting profit.

b)Derive the TR, TC and profit tables and plot the graphs depicting the AC, TR, TC and profits.

c)Compute the break-even price and quantity