Source: https://www.youtube.com/watch?v=eyzDtyy_ghw

1/ Kismet restaurant has revenues of $350,000, and explicit costs for labor, rent and food of $300,000. The restaurant's owner believes she could find an alternative full-time job earning $60,000 as an executive chef. What is the accounting profit?

$50,000

$650,000

$60,000

-$50,000

2/ Kismet restaurant has revenues of $350,000, and explicit costs for labor, rent and food of $300,000. The restaurant's owner believes she could find an alternative full-time job earning $60,000 as an executive chef. What is the economic profit?

$360,000

-$10,000

$350,000

$10,000

3/ Which of the following is a good example of an implicit cost that should be taken into account when computing a restaurant's economic profit?

The cost of fixing the restaurant's freezer.

The interest the owner could obtain by lending money tied up in the restaurant.

The rent the owner must pay on the restaurant space.

Food that is wasted because of a slow day.

4/ On the meaning of profit, which of the following is a correct ranking of profits from largest to smallest?

Economic profit, normal profit, accounting profit.

Normal profit, accounting profit, economic profit.

Accounting profit, economic profit, normal profit.

Accounting profit, normal profit, economic profit.

5/ Which of the following is a good example of an implicit cost that should be taken into account when computing a restaurant's economic profit?

The cost of the licenses that the restaurant must obtain from the city.

A. The wages of an employee who does not work hard.

Payments the restaurant makes on leased kitchen equipment.

The value of the home office in which the owner keeps company records.

6/ Accounting profit = Revenue - explicit costs.

True

False

7/ Normal profit occurs when revenue equals the sum of explicit and implicit costs.

True

False

8/ The goal of entrepreneurs is to earn economic profits.

True

False