Fixed and Variable Costs
This post from the Freakonomics blog has a nice little description of fixed and variable costs, as applied to hot dog vendors in New York City.
A Slate article mentions that the annual price of a hot-dog stand license near the Metropolitan Museum of Art in New York City is $362,201. Licenses are very limited and are bought at auction. The price presumably reflects the economic rent associated with the particular site (the price would be a lot lower in the middle of Central Park). Yet at a fixed cost of $1,000 per day, how can a hot-dog vendor make enough money to cover his variable cost, including the value of his own time?
I teach principles of economics courses and a course in the economics of healthcare at Southern Oregon University.