Question # 1:

1.Joe, who has no skills, no job experience, and no alternative job, runs a shoeshine stand. Other shoeshine operators earn $10,000 a year. Joe pays rent of $2,000 a year, and his total revenue is $15,000 a year. Joe spent $1,000 on equipment and he used his credit card to buy it. The interest on a credit card balance is 20 percent a year. At the end of the year, Joe was offered $500 for his business and all its equipment. Calculate Joe's opportunity cost of production and economic profit.

2.Governments impose excise taxes on goods that have inelastic demand, such as cigarettes, more often than in other cases. Why?