Use the following to answer question:
-(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?

Question

Use the following to answer question: 
-(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?

Quizplus · Accepted Answer

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.

Use the Following to Answer Question