Problem: Module $6$ Textbook Problem $2$

Learning Objective: $6-1$ Identify the characteristics of relevant information

Norman Dowd owns his own taxi, for which he bought a $$12,900$ permit to operate two years ago. Mr$.$ Dowd earns $$38,700$ a year operating as an independent but has the opportunity to sell the taxi and permit for $$45,500$ and take a position as dispatcher for Carter Taxi Co$.$ The dispatcher position pays $$36,500$ 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 $$45,500$ and can earn a $10$ percent return.

Required

a$.$ Determine the opportunity cost of owning and operating the independent business.

b$.$ 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?

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