Use the following to answer question:
-(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 $60,how many lawns will Alex mow?

Question

Use the following to answer question: 
-(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 $60,how many lawns will Alex mow?

Quizplus · Accepted Answer

In order to determine the profit-maximizing quantity, we need to compare the marginal cost to the price. The marginal cost increases as the quantity of lawns mowed increases, according to the table. At a price of $60 per lawn, Alex will mow all the lawns from 1 through 40 because the marginal cost is less than the price. However, at a price of $60 per lawn, it would not be profitable for Alex to mow lawns 41-50 because the marginal cost is greater than the price. Therefore, Alex will mow 40 lawns (1-40) in order to maximize profits.

Use the Following to Answer Question