Three college students are considering operating a tutoring business in economics. This business would require that they give up their current jobs at the student recreation center, which pays $6,000 per year. A fully equipped facility can be leased at a cost of $8,000 per year. Additional costs are $1,000 a year for insurance and $.50 per person per hour for materials and supplies. Their services would be priced at $10 per hour per person. a. What are fixed costs? b. What are variable costs? c. What is the marginal cost? d. How many student hours would it take to break even ?

Three college students are considering operating a tutoring business in economics. This business would require that they give up their current jobs at the student recreation center, which pays $6,000 per year. A fully equipped facility can be leased at a cost of $8,000 per year. Additional costs are $1,000 a year for insurance and $.50 per person per hour for materials and supplies. Their services would be priced at $10 per hour per person. a. What are fixed costs? b. What are variable costs? c. What is the marginal cost? d. How many student hours would it take to break even ?

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter4: Extent (how Much) Decisions

Section: Chapter Questions

Problem 5MC

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