Question
Chris P. Nugget runs a small fast-food chicken restaurant named Poultrygeist.. He hires one employee at a cost of $28,000 per year, pays annual rent
Chris P. Nugget runs a small fast-food chicken restaurant named "Poultrygeist.". He hires one employee at a cost of $28,000 per year, pays annual rent of $25,000 for his shop, and spends $75,000 per year on other inputs (food, supplies, etc.). He has $100,000 of his own funds previously invested in equipment (ovens, serving counters, etc.) that could earn him $8,000 per year if these funds were alternatively invested. Chris has been offered $80,000 per year to work as a restaurant manager for a competitor. Total annual revenue from the restaurant is $200,000. For all answers, be specific and show your work in order to receive full credit.
a. How much are Mr. Nugget's "explicit costs" this year?
b. How much are Mr. Nugget's "implicit costs" this year?
c. What is Mr. Nugget's "accounting profit" this year?
d. What is Mr. Nugget's "economic profit" this year?
e. Put into words what your answer to part d. means for Mr. Nugget's decision about whether to stay at his restaurant or to close and take the offer at his competitor's place. __________
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