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1. Suppose that a small hair styling salon had revenues of $150,000 in a given year. The owner spent $10,000 on utilities, $60,000 on supplies (shampoo, conditioner, hair coloring and other chemicals, etc.), and $50,000 on equipment (mirrors, chairs, scissors, curling irons, etc.), including maintenance. The owner could have earned $50,000 working at another
salon. a.
b.
(5 Points) Calculate the accounting and economic profit for the hair styling salon. Show your
work.
Based on your answers in part (a), should the owner close this salon or continue with it?
Quantity of cakes |
Fixed Cost |
Variable Cost |
Total Cost |
Average Fixed Cost |
Average Variable Cost |
Average Total Cost |
Marginal Cost |
1 |
$13 |
$38 |
|||||
2 |
$28 |
||||||
3 |
$70 |
||||||
4 |
$64 |
||||||
5 |
$110 |
||||||
6 |
$108 |
||||||
7 |
$133 |
||||||
8 |
$185 |
Based on your numbers, draw diagrams showing the following:
ECON 2103: Problem Set 4 Prof. Jog 4. Consider the following table of long-run total costs for four different firms: (5 Points)
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