Sally quit her job as an auto mechanic earning $60,000 per year to start her own business. To save money she operates her business out of a small building she owns which, until she started her own business, she had rented out for $15,000 per year. She also invested her $20,000 savings (which earned a market interest rate of 6% per year) in her business. You are given the following information about the first year of her operations. [Show your work]

Total revenue $120,000

Cost of labor 40,000

Cost of materials 15,000

Equipment rental 5,000

1. Sally's economic cost of running her business. (2 marks)

2. Sally's accounting cost of running her business. (1 mark)

QUESTION 2

Refer to Figure 11-9 below to solve the following problems. Costs per unit B $22 C e 7 0 10 Quantity of output a. Identify the curves in the diagram: A B and C (1 mark) b. What is the numerical value of fixed cost when the quantity of output=10? c. What is the numerical value of variable cost when the quantity of output=10