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.At what price does Alexa' s short-run supply curve start?

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.At what price does Alexa' s short-run supply curve start?

Quizplus · Accepted Answer

The short-run supply curve in a perfectly competitive market starts at the minimum point of the marginal cost curve. Since the marginal cost of clearing each of the lots from 1 through 10 is $20, the supply curve starts at this price. However, the question asks for the price, which is typically above the marginal cost to cover average variable costs. Therefore, the price at which Alexa's supply curve starts is $15, which is the lowest price at which she is willing to supply any quantity.

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