Assume hotdog stands in New York are in a perfectly competitive market. Jacob is taking over a hot dog stand from his uncle. Let’s say initially it is the only hotdog stand in three blocks. Currently he charges a price of $5 a hotdog and sell about 100 hotdogs every day. His uncle left to cart to him, but he still has to pay a $18,250 a year for an inspection and permit (think this as rent). For 100 dogs, it costs him $100 a day in ingredients and $50 a day in propane to grill. a. What is Jacob’s average fixed cost (per day)? What is his variable cost (per day)? And finally, what is his average total cost (per day)? b. In side-by-side graphs please illustrate what the market for hotdogs looks like as a whole and for your individual stand. Be sure to label everything. c. How much profit are you earning? Calculate it and show it on the graph.
Assume hotdog stands in New York are in a
a. What is Jacob’s average fixed cost (per day)? What is his variable cost (per day)? And finally, what is his average total cost (per day)?
b. In side-by-side graphs please illustrate what the market for hotdogs looks like as a whole and for your individual stand. Be sure to label everything.
c. How much profit are you earning? Calculate it and show it on the graph.
d. Now imagine, others are realizing Jacob’s success and start filling up the empty street corners with their hotdogs. In a new side-by-side graph please show me how this affects the market generally and Jacob’s cart. What happens to his profit after all?
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