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The owner of Fat Man's Sausage Cart is concerned because the stand has been averaging only 5,500 sausage sales per month, the stand and staff can make 7,000 sausages on a bun per month. The variable cost of each sausage (buns, meat etc.) is $3.50. Monthly fixed costs are (taxes, licenses, space rent and salaries) are $10,000. The owner (Big Bob) believes he could sell 7,000 sausages per month if he cuts the sales price from $7.50 to $7.00 per sausage. How much extra profit (above the current level) would he generate if he decreased the sales price?
Economic Loss
Refers to the reduction in total revenue that is greater than the total cost of a business, leading to a negative profit scenario.
Economic Efficiency
A state where resources are allocated in a way that maximizes the production of goods and services while minimizing waste and inefficiencies.
Fundamental Questions
Basic economic questions that include what to produce, how to produce, and for whom to produce, reflecting scarcity and resource allocation.
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