Exhibit 8-15 Short-run cost curves for E-Z Care lawn mowing company

In Exhibit 8-15, suppose the market price of mowing lawns falls to $10 per lawn. In this situation, E-Z-Care will:

Question

Exhibit 8-15 Short-run cost curves for E-Z Care lawn mowing company

In Exhibit 8-15, suppose the market price of mowing lawns falls to $10 per lawn. In this situation, E-Z-Care will:

Quizplus · Accepted Answer

In the short run, E-Z Care will continue to mow lawns in spite of the lower price since its total revenue will still exceed its variable costs (i.e., it can still cover its variable costs even if it cannot cover all its fixed costs). However, it will incur economic losses in the short run. If the price remains low in the long run, E-Z Care may exit the industry or adjust its operations to minimize losses.

Exhibit 8-15 Short-Run Cost Curves for E-Z Care Lawn Mowing