a. Identify on the diagram above the demand the firm will face. b. Calculate the actual profit of the firm. c. Would it choose to close down? Why? d. Can they fully pay the rent? How much is it? (a good estimate can be taken at q=3200) e. When the lease is up, would you suspect that this firm closes down for good? How many donuts is the rm making? How do you know? Is store making a profit? How much? If the only fix cost they have is rentJr how much is it (a good guess can be taken easily at q=1200)? If the firm believed that it was making the most profit if it produced 1200 donuts, what would you tell them? And how would you prove your answer? Question 2 (5 points) This high demand for donuts are allowing Vandals (Store 1) to reap abnormal profits. A new store choose to open up. However, the store leases a bigger space in a newer building (which has higher fixed costs). The following diagram provides you with plausible cost curves. The new market price for donuts drops to $2 apiece after the change in market supply. Store 2 MC ATC AVC Price of Donut 0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5 0 800 1600 2400 3200 4000 4800 5600 6400 7200 8000 DonutsQuestion 1 (5 pts) Donut stores are making their way to Halifax! What a great time to be alive! The following graph provides you with a plausible cost diagrams for one of the stores (store 1: Vandals). The donuts are sold at a market price of $2.50 apiece. Assume the total Market for donuts in Halifax is 2 Million donuts. MC ATC AVC Price of Donut 0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5 P=MR 0 600 1200 1800 2400 3000 3600 4200 4800 5400 6000 Donuts