"Running head: MICRO ECONOMICSMicro economicsName of the studentName of the universityAuthor note:MICRO ECONOMICS1Table of ContentsAnswer to question number 1: ................................................................................................... 2Answer to question number 2: ................................................................................................... 2Reference list: ............................................................................................................................ 4MICRO ECONOMICS2Answer to question number 1:According to Khanna, Panigrahi & Joshi (2016), economic profit is the term whichindicates the difference between the aggregate output and total payments to factors ofproduction. In specifically, economic profit = Y- (MP . L) – (MP . K). Now, if Constantl K Returns to Scale (CRS) operate in the production process then there will be no economicprofit as Y = MP . L + MP . K. However, the producers will earn an income as they supplyl K capital. The income of the producer is called the rental of capital which is equal to MP . K.K Thus, accounting profit = economic profit and rental of capital. As a result, though theeconomic profit is zero, accounting profit is positive which is rental of capital. Thus, thegrocery stores exist in the market though they do not earn economic profits. Answer to question number 2: In the words of Li et al., (2013), the term fixed overhead cost refers that type of costswhich do not changes according to the changes of the output. These types of costs remainunchanged whether the business make profit or loss. In short, it remains the same no matterhow much the output of the firm produces. The salaries of the stuff, rent of the office house,depreciation cost of the production and many more are the real life examples of fixedoverhead cost. Thus, according to the problem, if the amount of fixed cost is $1000.00, then,the average fixed cost curve looks like the rectangular hyperbola.MICRO ECONOMICS3Figure 1: Average Fixed Cost curveSource: (As created by author)"