Suits Only, a dry cleaning firm that specializes in cleaning business suits, operates in a perfectly competitive market. Robin Smith, an exceptionally talented manager, has been hired to manage Suits Only. In the dry cleaning business, a manager typically makes a salary of $400 per week. Suits Only faces the long-run average and marginal costs shown in the figure below. In long-run competitive equilibrium, the market price for cleaning a business suit is $4.50.
Given the above, if Robin Smith buys Suits Only and continues to manage it herself, she will
A. earn $75 in economic rent per week.
B. earn zero economic profit.
C. earn $75 in economic profit each week.
D. both a and b.
Answer: D
Economics
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