Table 1.1 Compute for the Marginal Utility.

(1 point for each box)

Amount Total Utility Marginal

Consumed Utility
(8-ounce
glasses)
0 0
1 50
2 80
3 100
4 105
5 100

Table 1.2 Compute for the Total Utility and Marginal Utility per Peso for both Milktea and Bread. (1
point for each box)

MILKTEA BREAD
Consume Total Marginal Marginal Consume Total Marginal Marginal
d per Utility Utility Utility per d per Utility Utility Utility per
week Peso if week Peso if
price = 10 price = 5
0 0 0 0
1 65 1 40
2 57 2 29
3 35 3 20
4 20 4 10
5 10 5 4
6 5 6 1
1. The sole proprietor of the "KNOWLEDGE AND WISDOM" bookstore receives all
accounting profits earned by her firm and a P1,400,000-a-year salary she pays
herself. She has a standing salary offer of P1,750,000 a year if she agrees to work for
a large corporation. If she had invested her capital outside her own company, she
estimates that would have returned P1,100,000 a year. Last year, her accounting
profit was P2,500,000. What was her economic profit? (5 points)

2. In his spare time, Mr. Gumela makes chain mail using metal rings he buys from a
hardware store, a C-clamp, and a pair of pliers. He sells the final product at local
crafts fairs and at bikers' annual convention in Dipolog City. Being interviewed once
by a local newspaper, he said literally the following: "The materials cost me P1500,
and the rest is just my labor, which is free. One vest sells for about P7,500, which
gives me net profit of P6,000 for three nights of work."

a. Is he talking about economic profit or accounting profit? Explain the difference

between the two. (5 points)
b. Discuss Mr. Gumela's statement from economic perspective (taking the
opportunity cost into account, that is). (5 points)

3. Greg currently works for a corporate law firm. He is considering opening his own
legal practice, where he expects to earn P10,000,000 per year once he gets
established. To run his own firm, he would need an office and a law clerk. He has
found the perfect office, which rents for P2,500,000 per year. A law clerk could be
hired for P1,750,000 per year.To open his own practice, Greg would have to quit his
current job, where he is earning an annual salary of P6,250,000. If these figures are
accurate, would Greg’s legal practice be profitable? (5 points)