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Lorelai purchases an inn in 2004 for $200,000. Today (2016) ifshe wants to operate it as a bed and breakfast she would have topay her cook $25,000/year, her assistant manager $50,000/year, and$10,000 in electric bills. Alternatively, she could could sell theinn to a large corporate hotel chain for $300,000. A second optionwould be to donate it to the local historical society; as a gestureof gratitude they would build a statue of her on the town square,which she would value at $25,000 (a) What are the explicit costs ofoperating the bed and breakfast? (b) What are the accounting costsof operating the bed and breakfast? (c) What are the economic costsof operating the bed and breakfast?

 

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