One year ago, Jack and Jill set up a vinegar-bottling firm (called JJVB). Use the following information to calculate JJVB’s opportunity cost of production during its first year of operation:
• Jack and Jill put $50,000 of their own money into the firm.
• They bought equipment for $30,000.
• They hired one employee to help them for an annual wage of $20,000.
• Jack gave up his previous job, at which he earned $30,000, and spent all his time working for JJVB.
• Jill kept her old job, which paid $30 an hour, but gave up 10 hours of leisure each week (for 50 weeks) to work for JJVB.
• JJVB bought $10,000 of goods and services from other firms.
• The market value of the equipment at the end of the year was $28,000.
• Jack and Jill have a $100,000 home loan on which they pay interest of 6 percent a year.