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You and your friend decide to open a bagel stand in the mall together. You negotiate a deal to rent a small kiosk in the mall for $500 a month, signing a lease for one year. Your bagel stand is open 10 hours a day, 30 days a month, and you always have one worker there who you pay $10/hr. You're able to buy your bagels for 75 cents each, and it costs you an additional 25 cents per bagel to use your toaster.

a. What are your Total Fixed Costs and Total Variable Costs?

b. Demand for bagels turns out to not be as high as you had expected, and you are only able to sell 1,750 bagels in your first month. Your friend thinks the two of you should shut down your business. Do you agree? Why or why not?

c. A new donut shop opens up next to your bagel stand, and now many fans of torus-shaped food items are opting for the less healthy option offered by the donut stand. Your bagel sales drop to 1,000 bagels for the month. Should you shut down your business? Explain.

Please explain so that I may come to the answer myself

Microeconomics, Economics

  • Category:- Microeconomics
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