Bette's Breakfast, a perfectly competitive eatery, sells its "Breakfast Special" (the only item on the menu) for $5.00. The costs of waiters, cooks, power, food, etc. average out to $3.95 per meal; the costs of the lease, insurance, and other such expenses average out to $1.25 per meal. Bette should A. lower her output. B. close her doors immediately. C. raise her prices above the perfectly competitive level. D. continue producing in the short run, but plan to go out of business in the long run.
