Question 2. You are thinking about opening a business. If you do, you will have to leave your current job, which pays $4000 month (you may assume you can always find alternative employment in this line of work, for the same pay). You anticipate your monthly revenues to be $11,000. You will have to sign 6 month leasing agreements for office space and equipment.

$1,200 in monthly rent for office space.$ 240 in monthly rent for equipment.$5,000 to your workers in wages for the month.$700 for the supplies you used that month.

Given this information, please answer the following questions. You may assume you like your current work and the new business equally as well - that is, there are no non-pecuniary benefits for either line of work:

$1,200 in monthly rent for office space.$ 240 in monthly rent for equipment.$5,000 to your workers in wages for the month.$700 for the supplies you used that month.

2A. What are the explicit costs of starting this business? Explain your answer.

2B. What is the opportunity cost of starting this business? Explain your answer.

2C. After signing the leasing agreement, what are you fixed (or sunk costs) associated with this business? Explain your answer.

2D. Give the information, should you start the business? Explain your answer. What is your surplus if you start the business?

2E. Modify the problem above with this small tweak: Suppose you derive some pleasure from 'being your own boss'. Assume being the boss gives you $500 a month pleasure. What is your surplus if you start this business? Should you start the business?