1. After working as a chef for many years, Peter finally wanted to open his own restaurant. Then his opportunity came along. He inherited some money from his distant relative and eventually started his restaurant a year ago. At the end of year one, Peter found he had spent $ 650,000 on rental, wages and other expenses. The restaurant brought in $ 750,000 revenue. However, Peter had to give up his old job where he earned $120,000 a year.

a. Calculate the accounting costs and accounting profit for Peter?

Accounting Cost =

Accounting Profit =

b. Calculate the economic costs and economic profit for Peter?

Economic Cost =

Economic Profit =

c. From the economic point of view, is the business profitable?

Ans: Explain

2. In this subject, we are assuming that a firm's goal is to maximise ___________. Ans:

Are economic profits usually higher than accounting profits? True / False Ans: Explain.

3. Total Product (output, Q): 0 1 2 3 4 5 6

Total Cost (TC): $50 $80 $105 $125 $155 $195 $250

a. The average variable cost (AVC) of producing three units of output is $______ Ans: (Hints: i) What is the total fixed cost (TFC) ii) what is the total variable cost (TVC)? Then, iii) calculate the average variable cost (AVC).)

b. The marginal cost (MC) of producing the sixth unit of output is $ _________ Ans: