Megan Used to Work at the Local Pizzeria for $15,000

question 54

Multiple Choice

Megan used to work at the local pizzeria for $15,000 per year but quit to start her own deli. To buy the necessary equipment, she withdrew $20,000 from her inheritance (which paid 8 percent interest) . Last year she paid $25,000 for ingredients and $500 per month rent but had revenue of $50,000. She asked her dad the accountant and her mom the economist to calculate her profit for her.

• A) Dad says she lost $11,000 and Mom says she lost $26,000.
• B) Dad says her profit is $31,000 and Mom says her profit is $16,600.
• C) Dad says her profit is $9,000 and Mom says she lost $6,000.
• D) Dad says her profit is $9,000 and Mom says her profit is $2,400.

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Definitions:

Price Paid

The actual amount of money exchanged for a good or service at the point of sale.

Demand Function

A mathematical expression representing the relationship between the quantity demanded of a good and its influencing factors like price, income, and preferences.

Supply Function

A mathematical representation of the relationship between the quantity of a good or service that producers are willing to sell and the price of that good or service.

Equilibrium Price

The price point in the market where the amount of goods being offered matches the amount of goods consumers want to buy.