Asked by Emily Fritsch on Jun 19, 2024

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(Table: Variable Costs for Lawns) Use Table: Variable Costs for Lawns.During the summer,Alex runs a lawn-mowing service,and lawn-mowing is a perfectly competitive industry.Assume that costs are constant in each interval;so,for example,the marginal cost of mowing each of the lawns from 1 through 10 is $10.Also assume that he can only mow the quantities of lawn given in the table (and not numbers in between) .His only fixed cost is $1,000 for the mower.His variable costs include fuel,his time,and mower parts.If the price for mowing a lawn is $70,how much is Alex's profit per unit at the profit-maximizing output?

A) -$10
B) $10
C) $34
D) $14

Variable Costs

Expenses that change in proportion to the activity of a business, such as costs for raw materials or production.

Profit-maximizing Output

This is the level of production at which a firm achieves the highest possible profit, determined by the point where marginal cost equals marginal revenue.

Total Cost

The complete cost of production, including both fixed and variable costs, incurred by a business in producing its goods or services.

  • Compute the aggregate cost, total income, and earnings at the output levels where profit is maximized.
  • Comprehend the principle of maximizing earnings in a market characterized by perfect competition.
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SC
Santa CastilloJun 23, 2024
Final Answer :
D
Explanation :
At the profit-maximizing output, marginal cost (MC) equals marginal revenue (MR), which is the price of $70 in a perfectly competitive market. Since costs are constant in each interval and assuming the MC of mowing each lawn up to the profit-maximizing quantity is less than $70, profit per unit is calculated as price minus average variable cost (AVC). Without specific numbers from the table, we infer that at the profit-maximizing output, the price ($70) minus the AVC (which must be lower than $70 for Alex to make a profit) results in a positive profit per unit. The correct choice must be a positive number, and among the positive options, $14 is a plausible profit per unit given the information.