QUESTION 1

1. In a business, provide two examples of explicit cost and two examples of implicit cost. Explain how these costs affect accounting and economic profit. 2 Marks
2. With relevant assumptions, use a numerical example to explain the significance of diminishing marginal returns to a firm. 3 Marks

QUESTION 2

1. Do you agree with the following comment, "Firms are to continue production despite making economic loss in the short run" Justify using diagram(s) in your explanation? 3 Marks

1. Define game theory and apply the game theory matrix diagram to illustrate and explain a strategic decision YOU made recently. 3 Marks