Asked by Keiona Wedderburn on Jun 18, 2024
Verified
(Table: Variable Costs for Lots) Use Table: Variable Costs for Lots.During the winter,Alexa runs a snow-clearing service in a perfectly competitive industry.Assume that costs are constant in each interval;so,for example,the marginal cost of clearing each of the lots from 1 through 10 is $20.Also assume that she can only plow the quantities of the lots given in the table (and not numbers in between) .Her only fixed cost is $1,000 for a snowplow.Her variable costs include fuel,her time,and hot coffee.If the price to clear a lot is $30,how many lots should Alexa clear?
A) 50
B) 40
C) 30
D) 0
Optimal Output
The level of production that maximizes a firm's profit or minimizes its cost, given its production function and market conditions.
Price to Clear
Price to Clear is the market price at which the quantity of goods supplied is equal to the quantity of goods demanded, thereby clearing the market.
- Identify the level of production that leads to the highest profit, considering specific costs and market prices.
Verified Answer
RE
Rebecca EdlerJun 20, 2024
Final Answer :
B
Explanation :
Alexa should clear lots up to the point where the price to clear a lot ($30) equals or exceeds her marginal cost. Since the marginal cost of clearing each of the lots up to 40 is less than or equal to $30, she should clear 40 lots to maximize her profit. Clearing more than 40 lots would mean the marginal cost exceeds the price, leading to a loss on those additional lots.
Learning Objectives
- Identify the level of production that leads to the highest profit, considering specific costs and market prices.
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