1. Shelley is deciding whether to start a winery. To do this, she must leave her job as a consultant from which she could earn $120,000 as a full-time employee, and instead take a part-time job as a gardener that pays $30,000. It costs her $110,000 to install watering equipment and vines. She pays for one-half of this amount from her savings, and borrows one-half. There is a 10% rate of interest. If she was to cease her business, then the watering equipment and vines would have no resale value. As well, she must pay $25,000 per year for water. At the time Shelley is deciding whether to start the business she plans to operate it for one year and then cease the business. Her opportunity cost of operating the business for that year is: a) $236,000 b) $225,000 c) $245,000 d) $278,000 e) Zero

1. Shelley is deciding whether to start a winery. To do this, she must leave her job as a consultant from which she could earn $120,000 as a full-time employee, and instead take a part-time job as a gardener that pays $30,000. It costs her $110,000 to install watering equipment and vines. She pays for one-half of this amount from her savings, and borrows one-half. There is a 10% rate of interest. If she was to cease her business, then the watering equipment and vines would have no resale value. As well, she must pay $25,000 per year for water. At the time Shelley is deciding whether to start the business she plans to operate it for one year and then cease the business. Her opportunity cost of operating the business for that year is: a) $236,000 b) $225,000 c) $245,000 d) $278,000 e) Zero

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter7: Production, Costs, And Industry Structure

Section: Chapter Questions

Problem 39P: A firm is considering an investment that will earn a 6 rate of return. If it were to borrow the...

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