Multiple Choice
Homer's Holesome Donuts has determined that its profit-maximizing quantity is 10,000 donuts per year. Homer's earns $12,000 in revenue from the sale of those donuts. Homer's has two costs. First he pays $16,000 in annual rental payments for its five-year lease on its store. Second Homer incurs an additional cost of $5,000 for ingredients. Should Homer's shut down in the short run?
A) Yes, because he is incurring an economic loss.
B) Yes, because he cannot cover all of his fixed costs.
C) No, because is making positive economic profit.
D) No, because he can cover all of his variable costs.
Correct Answer:
Verified
Correct Answer:
Verified
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