Lastyear, the market value of thefirm's showroom and workshop increased from$600,000 to$675,000; the market value of the inventory of unsold bikes decreased from$400,000 to$320,000; and the market value of thefirm's tools remained constant at$5,000.

The firm paid manufacturers$770,000 for bikes.

The cost of electricity and IT services was$25,000.

The wages paid to shop assistants was$50,000.

Mike is thefirm's entrepreneur. He also workspart-time at a bike manufacturer for 50 weeks a year that pays$40 per hour. The manufacturer wants Mike to work fulltime, but instead he does repairs atMike's Bikes for 10 hours a week.

Normal profit in bike retailing is$40,000 per year.

The interest rate is 5 percent per year.

How did you come up with these answers?

1. What was the cost of the resources bought byMike's Bikes in the marketplace lastyear?

The total cost of the resources thatMike's Bikes bought in the marketplace last year was $

845,000

845,000.

2. What wasMike's Bikes' opportunity cost of using resources owned by the firm lastyear?

The total opportunity cost of using resources owned by the firm last year was $

55,000

55,000.

3. What wasMike's Bikes' opportunity cost of using resources supplied by Mike lastyear?

The opportunity cost of using resources supplied by Mike last year was $

60000

60000 .

4. What wasMike's Bikes' opportunity cost of production lastyear?

Mike's Bike's opportunity cost of production last year was $

nothing

.