Susan quit her job as a teacher, which paid her $48,000 per year, in order to start her own catering business. She spent $12,000 of her savings, which had been earning 10 percent interest per year, on equipment for her business. She also borrowed $12,000 from her bank at 10 percent interest per year, which she also spent on equipment. For the past several months she has spent $1000 per month on ingredients and other variable costs. Also, for the past several months she has taken in $4700 in monthly revenue. What should Susan do in the short run and the long run? In the short run, Susan should continue to operate her business, but in the long run she should exit the industry. In the short run, Susan should continue to operate her business, but in the long run, she will probably face competition from newly entering firms. In the short run, Susan should shut down her business, and in the long run, she should exit the industry. In the short run, Susan should continue to operate her business, and she is also in long-run equilibrium.
Susan quit her job as a teacher, which paid her $48,000 per year, in order to start her own catering business. She spent $12,000 of her savings, which had been earning 10 percent interest per year, on equipment for her business. She also borrowed $12,000 from her bank at 10 percent interest per year, which she also spent on equipment. For the past several months she has spent $1000 per month on ingredients and other variable costs. Also, for the past several months she has taken in $4700 in monthly revenue. What should Susan do in the short run and the long run? In the short run, Susan should continue to operate her business, but in the long run she should exit the industry. In the short run, Susan should continue to operate her business, but in the long run, she will probably face competition from newly entering firms. In the short run, Susan should shut down her business, and in the long run, she should exit the industry. In the short run, Susan should continue to operate her business, and she is also in long-run equilibrium.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Susan quit her job as a teacher, which paid her $48,000 per year, in order to start her own catering business. She spent
$12,000 of her savings, which had been earning 10 percent interest per year, on equipment for her business. She also
borrowed $12,000 from her bank at 10 percent interest per year, which she also spent on equipment. For the past
several months she has spent $1000 per month on ingredients and other variable costs. Also, for the past several
months she has taken in $4700 in monthly revenue. What should Susan do in the short run and the long run?
In the short run, Susan should continue to operate her business, but in the long run she should exit the industry.
In the short run, Susan should continue to operate her business, but in the long run, she will probably face
competition from newly entering firms.
In the short run, Susan should shut down her business, and in the long run, she should exit the industry.
In the short run, Susan should continue to operate her business, and she is also in long-run equilibrium.
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