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? 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 Donuts