Between 5 a.m. and 6 a.m., Dotty’s Deli serves an "early bird special" for $5 (the only item on the menu). The cost of waiters, cooks, food and other variable costs average out to $4.50 per meal; the costs of the lease, insurance, and other fixed costs average out to $1.50 per meal. Assume Dotty makes more than enough profit during the 6 a.m. to 10 a.m. breakfast rush to cover the losses on the early bird meal special. To maximize profit, Dotty should:
A. Continue selling the special in the short and long run.
B. Continue selling the special in the short run but stop selling it in the long run.
C. Raise the price of the special to above $6.
D. Stop selling the early bird special and only open at 6 a.m.
Close the store immediately.
1 answer
A. Continue selling the special in the short and long run.