Plain Sense Economics » Short Run Costs http://www.plain-sense.com For students and friends of economics Wed, 07 Jul 2010 15:07:05 +0000 http://wordpress.org/?v=2.8 en hourly 1 Fixed and Variable Costs http://www.plain-sense.com/2009/08/19/fixed-and-variable-costs/ http://www.plain-sense.com/2009/08/19/fixed-and-variable-costs/#comments Thu, 20 Aug 2009 02:07:48 +0000 Doug Gentry http://www.plain-sense.com/?p=139 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?

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