1. S&D: You’re the boss!
Imagine you are going to open up your own restaurant. List things and/or people that you will need in order to be ready for opening day.

2. Fixed Cost: things you have to pay for, regardless of output (production)
Building
Insurances
AKA overhead (costs you can’t change)

3. Variable Cost: changes w/output
Food
Labor
Fold a blanket
Marginal Product: extra product produced w/each add’l worker
Law of diminishing returns: At a certain point, stops making sense to hire more people

4. Marginal Cost: cost to produce an add’l item
To produce two pasta dinners instead of one – what will you need to buy?

5. Total Costs = Fixed + Variable
Fixed costs for you:
Variable costs:

6. How do you maximize profit?
Produce as much as you can while still keeping costs low
Sometimes, it’s best to shut down the business

7. Should your restaurant stay open 24 hours a day
Should your restaurant stay open 24 hours a day? Or only be open for dinners?
Revenue must cover variable costs (ignore fixed costs since they will remain the same)
So, if your restaurant…
Sells $150 worth of food from midnight to 6 am
Food costs $50
Need 2 servers who cost $10/hour – should you remain open?