Question 4: (10 marks)

Question 4a: Say you are thinking of establishing a small business to sell mobile phones. You think you can make $500,000 a year selling mobile phones with expenses of $350,000 a year, but you will have to leave your current job where you earn $100,000 a year.

(a) Calculate the expected accounting profit? (1.5 mark)

(b) Calculate the expected economic profit? (1.5 mark)

(c) From the economic point of view, is the small business profitable? Explain (2 marks)

Question 4b: Fill in the blanks (5 marks):

PRICE	QUANTITY	TR	MR	TFC	TC	MC
$600	5	$			$2400
$ 500	7	$	$	$2000	$2800	$