Scenario: Accounting and Economic Profit

Rather than put the $100,000 that his grandmother left him in a mutual fund and earn 5% each year, Tommy Wang quit his job that paid $60,000 per year and used the $100,000 to start Wang's Wicker Furniture Store. He rented a showroom for $15,000 for the year, purchased $100,000 in capital equipment (an amount that depreciates $5,000 each year), purchased $60,000 in wicker furniture, and incurred costs of $40,000 for sales help and advertising. In his first year, his revenue was approximately $150,000.

1.	(Scenario: Accounting and Economic Profit) The economic profit of Wang's Wicker Furniture Store is:
	A)	$67,000.
	B)	$0.
	C)	$20,000.
	D)	$35,000.

2. After the first unit sold, the marginal revenue a monopolist receives from selling one more unit of a good is less than the price at which that unit is sold because of:
	diminishing marginal returns.
	increasing marginal cost.
	a downward-sloping demand curve.
	declining average fixed cost.
3.(Figure: A Profit-Maximizing Monopoly Firm) This profit-maximizing monopoly firm's cost per unit at its profit-maximizing quantity is:
	$8.
	$15.
	$16.
	$18.

Figure: A Profit-Maximizing Monopoly Firm