Refer to Scenario 9

question 22

Multiple Choice

Refer to Scenario 9.10 below to answer the question(s) that follow.
SCENARIO 9.10: Investors put up $1,040,000 to construct a building and purchase all equipment for a new cafe. The investors expect to earn a minimum return of 10 percent on their investment. The cafe is open 52 weeks per year and serves 900 meals per week. The fixed costs are spread over the 52 weeks (i.e. prorated weekly) . Included in the fixed costs is the 10% return to the investors and $2,000 in other fixed costs. Variable costs include $2,000 in weekly wages, and $600 per week in materials, electricity, etc. The cafe charges $6 on average per meal.
-Refer to Scenario 9.10. In the long run, the cafe will want to

• A) operate and expand.
• B) operate but not expand.
• C) shut down but not go out of business.
• D) go out of business.

---

Definitions:

Leisure

Free time available to a person away from duties, work, or other compulsory activities.

Nonlabor Income

Income received that does not originate from employment or work efforts, such as dividends, interest, or rental income.

Wage Rate

The amount of money that is paid to a worker per unit of time or per unit of output, often discussed in the context of labor markets.

Budget Equation

A mathematical representation of the constraint that the total value of goods and services a consumer can purchase is limited by their income.