Mary Beth, a former office worker, recently opened a pastry shop. To start the business, she resigned from her job where she earned $5,000 a month and rented a shop in the nearby mall. The rental agreement is locked for one year with no early exit.

The other information regarding the business is as follows:

• Total revenue: $5,000 per month
• Fixed costs (Rent): $800 per month
• Variable costs (wages, raw material, and other costs): $2,200 per month
• Assume that pastry shops operate in a competitive market.

a) Calculate Mary Beth's

• Accounting profit/loss, and
• Economic profit/loss

Show all your workings.(2 marks)

b)Explain what Mary Beth should do in the short-run. Should she continue selling, shut down, or exit the industry?(3 marks)

Hint: your answer shouldapply relevant economic conceptsanduse your calculationsabove