Question: Refer to Problem 2. ( LO2 , LO3 ) a. Suppose the cafs revenues and expenses remain the same, but recyclers earnings rise to $1,100

Refer to Problem 2. ( LO2 , LO3 )

a. Suppose the café’s revenues and expenses remain the same, but recyclers’

earnings rise to $1,100 per year. Is the café still making an economic profit?

Explain.

b. Suppose John had not had to get a $10,000 loan at an annual interest rate of 10 percent to buy equipment, but instead had invested $10,000 of his own money in equipment. How would your answer to 2a and 2b change?

c. If John can earn $1,000 a year as a recycler, and he likes recycling just as well as running the café, how much additional revenue would the café have to collect each year to earn a normal profit?

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