 Vera owns a boutique cupcake shop and her tasty treats are quite popular with her customers. She sells 200 cupcakes every day. Unfortunately, her tiny bakery is at maximum capacity, and with increased rent payments, she is losing money. Vera will be moving to a bigger bakery in a cheaper location next month, but she still has one month left on her lease for her current location. She can't decide between two options, to close the old location right away, or to keep operating until the new facility opens. As a skilled business person, Vera must make a decision based on profit. Therefore, she sketches out her financial situation. She sells each cupcake for $4, which is pretty high, but she doesn't think she can raise that price. This is her revenue for each cupcake. The ingredients for making each cupcake, which include flour, eggs, chocolate and sugar, cost $3. These are her marginal cost, or the additional cost it takes to bake a new cupcake. The rent for the bakery is her fixed cost, meaning that it will not change no matter how many cupcakes she bakes. The landlord will still expect that check at the end of the month no matter how much she produces. On average, her rent comes to about $300 each day. Vera considered simply closing the small location. If she puts a lock on the front door and walks away, she would still have to pay $300 a day for rent. Of course, she won't pay for the ingredients, but she won't get any revenue either. Vera then runs the numbers for staying open. She makes $4 for each cupcake and her ingredients are $3. So Vera can put $1 towards rent for each cupcake she sells. At $200 cupcakes a day, that covers two-thirds of her rent. In terms of profitability, it's preferable to only lose $100 instead of $300 in the short run. In other words, when the price for a product is greater than the marginal cost it takes to make it, the firm should stay open the short run no matter how high its fixed costs are. In this case, Vera took in $4 the price of the cupcake, which was more than the $3 in the ingredients for it, which is the marginal cost. By bringing in revenue, she can offset some of the burden of her high rent costs. So Vera decided to stay open, much to the delight of her loyal customers and her pocketbook. They are excited for her to move to her bigger location, but thanks to the short run shutdown rule, they will not have to take a break from eating Vera's cupcakes.