Question
In: Economics
Bob’s lawn-mowing service is a profit-maximizing, competitive firm. Bob mows lawns for $30 each. His total...
Bob’s lawn-mowing service is a profit-maximizing, competitive firm. Bob mows lawns for $30 each. His total cost each day is $310, of which $40 is fixed and sunk for the next 3 months. He mows 10 lawns a day. Marginal cost is always the same, no matter how many lawns are mowed. After 3 months, if Bob wants to keep mowing lawns, he needs to renew the $40 a day fixed cost obligation.
+Compute marginal cost of mowing one lawn
+Compute Bob’s daily profits in the short term (for this question let’s assume the short term is any time period shorter than 3 months). Use the economic approach to calculate profits, not the accounting one.
+Determine if Bob should stay in business during the next 3 months.
+Compute Bob’s daily profits in the long term and determine whether he should stay in business after 3 months.
Solutions
Expert Solution
Bob’s lawn-mowing service is a profit-maximizing, competitive firm. Bob mows lawns for $30 each. His total cost each day is $310, of which $40 is fixed and sunk for the next 3 months. He mows 10 lawns a day. Marginal cost is always the same, no matter how many lawns are mowed. After 3 months, if Bob wants to keep mowing lawns, he needs to renew the $40 a day fixed cost obligation.
. Now in long term after
3 months , TR = 270 Then $40 as fixed (sunk) cost need to be
incurred so gt will in air losses.
Thus exist in long run.
Rahul Sunny answered 2 years agoRelated Solutions
Bob's lawn mowing service is a profit maximizing competitive firm. The following questions relate to Bob's...
Bob's lawn mowing service is a profit maximizing competitive
firm. The following questions relate to Bob's short run and long
run decisions regarding shutting down and exiting. For each
question, determine whether Bob should shut down or operate in the
short run and exit or remain in lawn mowing business in the long
run.
a. Suppose that Bob is payed $28 per lawn and he mows 12 lawns
per day. His total cost each day is $400, of which $50...
(b) Ahmad’s business is a profit-maximising, perfectly competitive firm. He mows lawns for $20 each. His...
(b) Ahmad’s business is a profit-maximising, perfectly
competitive firm. He mows lawns for $20 each. His total cost each
day is $220, of which $40 is a fixed cost. He mows 10 lawns a day.
(i) What is Ahmad’s profit/loss per day if he shuts down? (1.5
marks) (ii) What is Ahmad’s profit/loss per day if he does not shut
down? (1.5 marks) (iii) What can you say about Ahmad’s short-run
decision regarding shutdown? Explain your answer. (1.5 marks) (iv)...
The Green and Grow Lawn Service mows its customers’ lawns and provides lawn maintenance starting in...
The Green and Grow Lawn Service mows its customers’ lawns and
provides lawn maintenance starting in the months of March through
October. During the winter months, the owners, Jack and Jill Hill,
find part-time jobs. They are considering the possibility of adding
a snow removal service during the winter. A snow blower and a
shovel would cost $700. They estimate their cost per job would be
$10.00. They are considering a charge of $55 to clear a normal-size
home driveway....
A profit-maximizing firm in a perfectly competitive market operates in the short run with total fixed...
A profit-maximizing firm in a perfectly competitive market
operates in the short run with total fixed costs of D
$2,250 and total variable costs (TVC) as is below. The
firm can only produce integer amounts of output (Q):
Q (Output)
TVC (Total Variable Cost
0
0.00
1
2,500
2
4,000
3
5,000
4
6,200
5
7,600
6
9,360
7
11,500
8
13,860
9
16,450
10
19,200
11
22,310
3a. How much output should the firm
produce if it can sell...
A profit-maximizing firm in a perfectly competitive market operates in the short run with total fixed...
A profit-maximizing firm in a perfectly competitive market
operates in the short run with total fixed costs of
$6,500.00 and total variable costs (TVC) as is below. The
firm can only produce integer amounts of output (Q)
Q
TVC
0
0.00
1
8,000.00
2
15,000.00
3
20,000.00
4
23,000.00
5
25,000.00
6
29,000.00
7
33,500.00
8
39,000.00
9
46,000.00
10
53,500.00
11
61,200.00
12
72,000.00
_______3. (2.5 pts.) How much output should the firm produce if
it can sell all...
10. A profit maximizing firm in a competitive market produces chairs. The firm, which is a...
10. A profit maximizing firm in a competitive market produces
chairs. The firm, which is a price-taker, faces a price of $35 for
its product. Its average variable cost is $24 and its average fixed
cost is $9 at the quantity where marginal cost equals marginal
revenue. In the short run, the firm
A. should raise the price of its product.
B. should lower the price of its product.
C. will experience losses but will continue to produce
chairs.
D....
How do a competitive firm, monopolist and monopolistically competitive firm determine its profit-maximizing level of output...
How do a competitive firm, monopolist and monopolistically
competitive firm determine its profit-maximizing level of output
and price? Explain your answer.
Leila runs a lawn mowing/maintenance service for busy homeowners. She has six potential customers and each...
Leila runs a lawn mowing/maintenance service for busy
homeowners. She has six potential customers and each is has a
different maximum price they are willing to pay per week. The
customers and the maximum price each is willing to pay each week is
as follows:
Customer Price
Lorraine $40
Gilda
15
Jane
30
John
25
Bill
20
Dan
35
Leila's costs depend on the number of customers she has. Her costs
(she has no sunk...
Leila runs a lawn mowing/maintenance service for busy homeowners. She has six potential customers and each...
Leila runs a lawn mowing/maintenance service for busy
homeowners. She has six potential customers and each is has a
different maximum price they are willing to pay per week. The
customers and the maximum price each is willing to pay each week is
as follows:
Customer Price
Lorraine $40
Gilda
15
Jane
30
John
25
Bill
20
Dan
35
Leila's costs depend on the number of customers she has. Her costs
(she has no sunk...
If a firm in a monopolistically competitive industry is profit-maximizing, it should choose its level of...
If a firm in a monopolistically competitive industry is
profit-maximizing, it should choose its level of advertising such
that the marginal revenue of an additional dollar of
advertising:
a) Is equal to the elasticity of its demand curve minus 1
b) Is exactly $1
c) Increases revenues by $1
d) Is equal to 1 plus the elasticity of its demand curve
e) Is equal to the elasticity of its demand curve
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- 1. The following questions concern Jesse Gelsinger who suffered from partial OTC. a. In the...
- Pittman Company is a small but growing manufacturer of telecommunications equipment. The company has no sales...
- TzeMay was one of the first women engineering students at ABC University. She graduated in 1995...
- Use the following information to calculate these various solvency measures: a) NWC, B) WCR, c) Current...
- The files SpeedControl.java and SpeedControlPanel.java contain a program (and its associated panel) with a circle that...
- Calculate the ideal age of a spouse. Enter either m or f from the keyboard in...
- Due to a recession, expected inflation this year is only 4.75%. However, the inflation rate in...
ADVERTISEMENT