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22 March, 08:14

Bette's Breakfast, a perfectly competitive eatery, sells its "Breakfast Special" (the only item on the menu) for $5.00. The costs of waiters, cooks, power, food etc. average out to $3.95 per meal; the costs of the lease, insurance and other such expenses average out to $1.25 per meal. Bette should:

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  1. 22 March, 08:53
    0
    Bette's Breakfast should increase the price or change the cost's structure.

    Explanation:

    Bette's Breakfast should increase the price to get any profits because the total of the cost of serving that breakfast is higher than the price.

    Profit = price * sales - ((Variable cost * sales) + Fixed cost)

    Other option is changing the structure of cost per meal.
  2. 22 March, 09:50
    0
    C. continue producing in the short run, but plan to go out of business in the long run.

    Explanation:

    Given:

    Average cost per meal = $5

    The costs of waiters, cooks, power, food etc. = $3.95 per meal

    costs of the lease, insurance and other such expenses = $1.25 per meal

    Total cost = fixed cost + variable cost

    = $3.95 + $1.25

    = $5.2

    Total cost, $5.2 per meal is greater than cost per meal, which is clearly a loss of $0.2 per meal.

    In the long run, Bette will go out of business.
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