Suppose the fixed cost of Christmas trees business is $7,000 and sunk.

Suppose the fixed cost of Christmas trees business is $7,000 and sunk. The variable cost for each tree is $20. According to the forecast, the market price for Christmas trees is $25 each and the owner could sell 1000 trees at most each year.

The owner A) should shut down the business.
B) should keep operating.
C) should sell less.
D) None of the above.

ANSWER

B