If a Restaurant in a Summer Tourist Area Is Highly

question 150

Multiple Choice

If a restaurant in a summer tourist area is highly profitable during the summer months but unable to cover even its variable costs during the winter months, the restaurant should

• A) go out of business immediately, because no firm should continue to operate if it is losing money; doing so is contrary to the idea of profit maximization.
• B) go out of business as soon as the summer is over; losses should never be tolerated.
• C) operate during all months of the year as long as its profits during the summer exceed its losses during the winter.
• D) shut down during the winter, but continue operating during the summer as long as the summer profits exceed the losses (fixed costs) during the winter shutdown period.

Determine the best financial option between lump sum and annuity payments.

Understand the application of compound interest in savings and retirement planning.

Understand the basic concept of present value and how to compute it for lump sums and annuities.

Distinguish between simple and compound interest and compute future values using both methods.

---

Definitions:

Deontological Theory

A moral philosophy that emphasizes the importance of duty and the inherent morality of actions, rather than outcomes or consequences.

Utilitarian Ethical Theory

An ethical theory suggesting that the best action is the one that maximizes utility, usually defined as that which produces the greatest well-being of the greatest number of people.

Profit Maximization Theory

The concept that businesses operate with the primary goal of increasing profits to the highest achievable level given their resources.

Martha Stewart

Martha Stewart is an American retail businesswoman, writer, and television personality, known for her lifestyle brand and media ventures, which focus on home improvement, cooking, and decorating.