Norman Dowd owns his own taxi, for which he bought a $10,900 permit to operate two years ago. Mr. Dowd earns $32,700 a year operating as an independent but has the opportunity to sell the taxi and permit for $41,000 and take a position as dispatcher for Carter Taxi Co. The dispatcher position pays $32,000 a year for a 40-hour week. Driving his own taxi, Mr. Dowd works approximately 55 hours per week. If he sells his business, he will invest the $41,000 and can earn a 9 percent return.

Required:

1. Determine the opportunity cost of owning and operating the independent business.

2. Calculate the earnings of Norman Dowd operating as an independent and the earnings of Norman Dowd working as a dispatcher. Based solely on financial considerations, should Mr. Dowd sell the taxi and accept the position as dispatcher?

Transcribed Image Text:

a. Opportunity cost b. Operating as an independent Working as a dispatcher Should Mr. Dowd sell the taxi and accept the position as dispatcher? a. Opportunity cost b. Operating as an independent Working as a dispatcher Should Mr. Dowd sell the taxi and accept the position as dispatcher?

Answer rating: 100% (QA)

Answer Opportunity cost Cost of owning and opera... View the full answer