You are evaluating starting a burger take-out business, and you want to know if this is a suitable business or not.

The background of this business is as follows:

a) From the productive point of view, a production and sales premises, minor machinery and labor are required.

You have a suitable physical premises, owned by your father, who to help you has decided to lend it to you at no cost, except for the responsibility of the corresponding contributions that amount to $ 300 thousand per year.

The facilities and machinery to start the business require an investment of $ 3.5 million. The market interest rate is 7% per year.

Information is available from very efficient premises in Santiago regarding the production of this good. The figures are detailed below.

Hamburger Production

No. of Employees No. of Burgers x hour

1 20

2 45

3 80

4 130

5 180

6 220

7 250

8 270

9 280

10 280

The salary at which one hour of work can be hired in this area is $ 1,000, and the inputs necessary to produce a hamburger (bread, meat, other additives, gas, etc.) cost an average of $ 360 per unit.

b) You have your own financing for the initial investment; however, your bank is willing to lend you the required $ 3.5 million.

c) You have a job offer for $ 1.2 million per month, which you would have to reject if you set up with the hamburger business, since both activities are not compatible from the point of view of time.

d) The facilities and machinery have a useful life of 5 years, after which they must be replaced with new equipment.

e) If you do not settle in with the hamburger business, your father has an offer to rent the premises of $ 400 thousand per month.

f) The information and studies that you have purchased to learn about this business have so far meant an expense of $ 2 million.

g) The business is planned to operate 8 hours a day from Monday to Sunday.

According to the above

i) Determine what are the marginal costs and short-term average costs in this business.

Make the assumptions you deem necessary. Explain.

ii) Determine what is the amount of monthly sales that minimizes the production costs of this business. Explain.

iii) If the price at which you can sell hamburgers in the market is $ 650 per unit, are you willing to get involved in this business? How many hamburgers would you produce per month in this case? Explain.

iv) What is the minimum price at which you are willing to sell your hamburgers? Explain.

v) If you are not a perfect competitor in this business, and you face a demand with a price elasticity equal to - 1.5, are you willing to go down from $ 650 to $ 550, if you were initially producing 300 hamburgers a day?