Peter was moving during a hot sunny day, He got very thirsty and couldn't continue with the journey he decided to stop over to drink some water. He took the first cup, but could not quench the thirsty, he took the second, third and on his fourth cup... he struggled to finish, the fifth cup he just poured it away. As an economist, interpret the situation of Peter in economic terms using the following concepts

(I) Utility (3marks)

(ii) Total utility (3marks)

(iii) Marginal utility (3marks)

(IV). Diminishing marginal utility (3marks)

(b) Firm's output decision and its costs calls for us to distinguish between two time frames - the short-run and the long-run

(I) Demonstrate your understanding for short-run and the long-run production costs (3marks)

(II) Using the graph, explain the relationship among MC, AVC, and ATC. (5marks)