Max Shreck, an accountant, quit his 80,000-a-year job and bought an existing tattoo parlor from its previous owner, Sylvia Sidney. The lease has five years remaining and requires a monthly payment of 4,000.
Max's explicit cost amounts to 3,000 per month more than his revenue. Should Max continue operating his business?
A) If Max's marginal revenue is greater than or equal to his marginal cost, then he should stay in business.
B) Max should continue to run the tattoo parlor until his lease runs out.
C) Max's explicit cost exceeds his total revenue. He should shut down his tattoo parlor.
D) This cannot be determined without information on his revenue.
Question 2
A member of a cartel like OPEC has an incentive to
A) support equal production quotas for each member.
B) argue for larger production quotas for each member of the cartel.
C) abide by its individual production quota.
D) agree to a low cartel production level and then produce more than its quota.
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