Reference no: EM133173742

Question - Tony withdrew $150,000 out of his personal savings account and used it to start his new cookie business. The bank account pays 3 percent interest per year. During the first year of his business, Tony sold 2,000 boxes of cookies for $2.50 per box. Also, during the first year, the cookie business made monetary outlays of $3000. You may assume that there is no opportunity cost to Tony's time. Calculate Tony's accounting and economic profits.

A college student has two options for meals: eating at the dining hall for $6 per meal or eating a takeaway snack for $1.50. His weekly food budget is $60.

Suppose the price of take-away snacks now rises to $2. Assume that our student now spends only 30 percent of his income on dining hall meals. How many times he will eats dining hall meal and how many times he will eats take a way snack?

What happened to the quantity of take away snacks consumed as a result of this price change? What does this result say about the income and substitution effects? Explain.