Question1. Susan quit her job as a teacher, which paid her $48,000 per year, in order to start her own catering business. She spent $12,000 of her savings, which had been earning 10 percent interest per year, on equipment for her business. She also borrowed $12,000 from her bank at 10 percent interest per year, which she also spent on equipment. For the past several months she has spent $1000 per month on ingredients and other variable costs. Also, for the past several months she has taken in $4700 in monthly revenue. What should Susan do in the short run and the long run?

options:

a. In the short run, Susan should shut down her business, and in the long run, she should exit the industry.

b. In the short run, Susan should continue to operate her business, but in the long run she should exit the industry.

c. In the short run, Susan should continue to operate her business, but in the long run, she will probably face competition from newly entering firms.

d. In the short run, Susan should continue to operate her business, and she is also in long-run equilibrium.

Question2. Shrimp Galore, a shrimp harvesting business in British Columbia, has a 30-year loan on its shrimp harvesting boat. The annual loan payment is $25,000 and the boat has a market (salvage) value that exceeds its outstanding loan balance. Prior to the 2015 shrimp harvesting season, Shrimp Galore's accountant predicted that at expected market prices for shrimp, Shrimp Galore would have a net loss of $55,000 after paying all 2015 expenses (including the annual loan payment). In this case, what should Shrimp Galore do?

options:

a. It should produce nothing and experience a loss of $25,000.

b. It should produce nothing and experience a loss of $55,000.

c. It should continue to operate even though it predicts a loss of $25,000.

d. It should continue to operate even though it predicts a loss of $55,000.

Questions 3.