Exercise A Static Opportunity costs LO
Norman Dowd owns his own taxi, for which he bought a $ permit to operate two years
ago. Mr Dowd earns $ a year operating as an independent but has the opportunity to
sell the taxi and permit for $ and take a position as dispatcher for Carter Taxi Company
The dispatcher position pays $ a year for a hour week. Driving his own taxi, Mr Dowd
works approximately hours per week. If he sells his business, he will invest the $ and
can earn a 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?
a Opportunity cost
b Operating as an independent
b Working as a dispatcher
b Should Mr Dowd sell the taxi and accept the position as dispatcher?
