Max Shreck, an accountant, quit his $80,000-a-year job and bought an existing tattoo parlor from its previous owner, Sylvia Sidney. The lease has five years remaining and requires a monthly payment of $4,000
Max's explicit cost amounts to $3,000 per month more than his revenue. Should Max continue operating his business?
A) If Max's marginal revenue is greater than or equal to his marginal cost, then he should stay in business.
B) Max should continue to run the tattoo parlor until his lease runs out.
C) Max's explicit cost exceeds his total revenue. He should shut down his tattoo parlor.
D) This cannot be determined without information on his revenue.
B
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A perfectly competitive market is characterized by
A) high barriers to entry. B) firms that are price setters. C) firms facing a downward sloping demand curve. D) no restrictions on entry into the market.
Relative purchasing power parity occurs when
A) purchasing power parity holds between every two countries. B) purchasing power parity only holds in recessions. C) the nominal exchange rate is constant. D) the real exchange rate is constant.