Kay's dog walking service is a profit-maximizing, competitive firm. Kate walks dogs for $7 each. Her total cost each day is $40-she spends $30 a day on gas driving to different neighborhoods, and her liability insurance and other fixed costs average out to $10 per day.

If Kay walks five dogs a day, Kay should shut down or operate
in the short run.?

2)Why would a producer decide to produce in a competitive market in which she will earn zero profit in the long run?


Choose one:
A. Because in the short run, her profit is always positive.
B. Because the zero profit in the long run is, in fact, zero accounting profit, and it only matters in the books.
C. Because the producer has a high cost of exiting this market, and counting that cost, it is better for her to continue operating at zero profit.
D. Because at zero profit, with her revenue, she can cover all her costs-explicit and implicit (opportunity cost).


Consider a competitive market for a consumer product. Suppose a tax is levied on consumers. This tax will increase or decrease
the market demand. As a result, the market equilibrium price will
decrease or increase in the short run. This will result in firms in entering or exiting this market in the long run.

Consider a competitive market for a consumer product. Suppose this product goes out of fashion with consumers. How will this sudden drop in popularity affect the profit of an individual firm in this market in the long run?


Choose one:
A. The profit of an individual firm increases from zero to a positive value in the long run.
B. The profit of an individual firm increases from a smaller positive value to a larger positive value in the long run.
C. The profit of an individual firm stays at zero in the long run.
D. The profit of an individual firm decreases from zero, and the firm will incur a loss in the long run.

Consider a competitive market for a consumer product. Suppose this product gains a sudden popularity among consumers. How will this sudden popularity impact the profit of an individual firm in this market in the long run?


Choose one:
A. The profit of an individual firm increases from zero to a positive value in the long run.
B. The profit of an individual firm increases from a smaller positive value to a larger positive value in the long run.
C. The profit of an individual stays at zero in the long run.
D. The profit of an individual firm decreases from zero, and the firm will incur a loss in the long run.