Kate’s 24-hour breakfast diner menu offers one item, a $5.00 breakfast special. Kate’s costs of servers, cooks, electricity, food, etc. average out to $3.95 per meal. Her costs for rent, insurance cleaning supplies, and business license average out to $1.25 per meal. Since the market is highly competitive, Kate should:
a. keep the business open in the short-run, and plan to expand the business in the long-run.
b. raise her prices above the perfectly competitive level set by the market.
c. keep the business open in the short-run but plan to go out of business in the long-run.
d. lay-off her staff break her lease and close the business down immediately.