Three graduate students are considering opening a fruit smoothie stand in the Harbor Springs, MIchigan, resort area during their summer break. This is an alternative to summer employment with a local firm, where they would each receive $6,000 over the 3-month summer period. A fully equipped facility can be leased at a cost of $8,000 for the summer. Additional projected costs are $1,000 for insurance and $3.20 per unit for materials and supplies. Their fruit smoothies would be priced at $5 per unit.
A.) What is the accounting cost function for this business?
B.) What is the economic cost function for this business?
C.) What is the economic break-even number of units for this operation?