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In: Economics

1) Draw a Long-run ATC curve that reflects economies of scale. 2)Assume you own and operate...

1) Draw a Long-run ATC curve that reflects economies of scale.

2)Assume you own and operate an auto repair shop in which you work and employ Harriet, a mechanic whose skills are very similar to yours, at $45,000 per year. Also assume that you do not pay yourself but rather hope for a profit at the end of the year.

A. Would the cost of your labor be an accounting cost? Explain.

B. Would the cost of your labor be an implicit cost? Explain.

C.Would the calculated profit at the end of the year reflect an economic profit? Explain.

D. Would $45,000 per year be a reasonable estimate of the opportunity cost of your labor? Why of why not?

E. Assume accounting profits at the end of the year are $55,000. What is the economic profit?

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Expert Solution

Rahul Sunny answered 1 year ago
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