Problem
Justin Brimer owns his own taxi, for which he bought a $31,000 permit to operate two years ago. Mr. Brimer earns $38,000 a year operating as an independent but has the opportunity to sell the taxi and permit for $84,000 and take a position as dispatcher for Carter Taxi Co. The dispatcher position pays $39,000 a year for a 37-hour week. Driving his own taxi, Mr. Brimer works approximately 50 hours per week. If he sells his business, he will invest the $84,000 and can earn a 15 percent return.
Required:
a. Determine the opportunity cost of owning and operating the independent business.
b-1. Calculate the earnings of Justin Brimer operating as an independent.
b-2. Calculate the earnings of Justin Brimer working as a dispatcher.
b-3. Based solely on financial considerations, should Mr. Brimer sell the taxi and accept the position as dispatcher? Yes No