A small farmer, who produces only lemons, is selling 20 quarts at the industry price of $4.90 per quart and the Average Variable Cost of producing 20 quarts is $4.00.

1. Is the farmer recovering her variable costs of production?
2. Suppose lemons and limes are good substitutes. Assume also the market price of limesdecreases. Explain the impact of this change on the lemon farmer's short run profits.
3. Would you recommend this lemon farmer leave the market? Why or Why not?

Please answer each question fully using supporting evidences