59.1k views
1 vote
Kate's 24-Hour Breakfast Diner menu offers one item, a $5.00 breakfast special. Kate's costs for servers, cooks, electricity, food, etc. average out to $3.95 per meal. Her costs for rent, insurance cleaning supplies and business license average out to $1.25 per meal. Since the market is highly competitive, Kate should

1 Answer

6 votes

Answer:

The firm should focus on operating during the short-term and plan to exit in the long run.

Step-by-step explanation:

Given that:

Price of the meal = $5

Fixed cost = $ 1.25

Variable cost = $3.95

Therefore,

Total cost = 1.25 + 3.95 = $5.20

The price which is offered i.e. $5 is less than total cost i.e. $5.20

The price offered is also greater than the variable cost which is $3.95

Thus, the firm should focus on operating during the short-term and plan to exit in the long run as the market seems to be highly competitive.

User Ravenwing
by
8.0k points
Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.