Suppose you are thinking about opening a hardware store. You estimate that it would cost $500,000 per year to rent the store and buy the stock. In addition, you would have quit your $50,000 per year job as an accountant.
- Define opportunity cost. (1 mark)
- What is your opportunity cost of running a hardware store for a year? If you could sell $510 000 worth of merchandise in a year, should you open the store? Explain. (3 marks)
- List some of your fixed costs and describe why they are fixed. (1 mark)
- List some of your variable costs and explain why they are variable. (1 mark)
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