Three college students are considering operating a tutoring business in economics. This business would require that they give up their current jobs at the student recreation center, which pay $6,000 per year. A fully equipped facility can be leased at a cost of $8,000 per year. Additional costs are $1,000 a year for and $.50 per person per hour for materials and supplies. Their services would be priced and $10 per hour per person.
a. What are fixed costs?
b. What are variable costs?
c. What is the marginal cost?
d. How many student-hours would it take to break even?