Joe, who has no skills, no job experience, and no alternative job, runs a shoeshine stand. Other shoeshine operators earn $10,000 a year. Joe pays rent of $2,000 a year, and his total revenue is $15,000 a year. Joe spent $1,000 on equipment and used his credit card to buy it. The interest on a credit card balance is 20 percent a year. At the end of the year, Joe was offered $500 for his business and its equipment. Calculate Joe's opportunity cost of production and economic profit.

Joe, who has no skills, no job experience, and no alternative job, runs a shoeshine stand. Other shoeshine operators earn $10,000 a year. Joe pays rent of $2,000 a year, and his total revenue is $15,000 a year. Joe spent $1,000 on equipment and used his credit card to buy it. The interest on a credit card balance is 20 percent a year. At the end of the year, Joe was offered $500 for his business and its equipment. Calculate Joe's opportunity cost of production and economic profit.

Microeconomics: Principles & Policy

14th Edition

ISBN:9781337794992

Author:William J. Baumol, Alan S. Blinder, John L. Solow

Publisher:William J. Baumol, Alan S. Blinder, John L. Solow

Chapter18: Pricing The Factors Of Production

Section: Chapter Questions

Problem 2TY

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Joe, who has no skills, no job experience, and no alternative job, runs a shoeshine stand.Other shoeshine operators earn $10,000 a year. Joe pays rent of $2,000 a year, and histotal revenue is $15,000 a year. Joe spent $1,000 on equipment and used his credit cardto buy it. The interest on a credit card balance is 20 percent a year. At the end of theyear, Joe was offered $500 for his business and its equipment. Calculate Joe’sopportunity cost of production and economic profit.
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