Homer's Holesome Donuts Has Determined That Its Profit-Maximizing Quantity Is

question 403

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 exit the market in the long run?

• A) yes, because he is incurring an economic loss
• B) yes, because all costs are fixed in the long run
• C) no, because he is making an economic profit
• D) no, because all costs are variable in the long run

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