Kate's 24-Hour Breakfast Diner menu offers one item, a $5.00 breakfast special. Kate's costs for servers, cooks, electricity, food, etc. average out to $3.95 per meal. Her costs for rent, insurance cleaning supplies and business license average out to $1.25 per meal. Since the market is highly competitive, Kate should
- raise her prices above the perfectly competitive level set by the market.
- keep the business open in the short-run, but plan to go out of business in the long-run.
- keep the business open in the short-run, and plan to expand the business in the long-run.
- lay-off her staff, break her lease, and close the business down immediately.