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-(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 $70,how much is Alex's profit per unit at the profit-maximizing output?

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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 $70,how much is Alex's profit per unit at the profit-maximizing output?

Quizplus · Accepted Answer

At the profit-maximizing output, marginal cost (MC) equals marginal revenue (MR), which is the price of $70 in a perfectly competitive market. Since costs are constant in each interval and assuming the MC of mowing each lawn up to the profit-maximizing quantity is less than $70, profit per unit is calculated as price minus average variable cost (AVC). Without specific numbers from the table, we infer that at the profit-maximizing output, the price ($70) minus the AVC (which must be lower than $70 for Alex to make a profit) results in a positive profit per unit. The correct choice must be a positive number, and among the positive options, $14 is a plausible profit per unit given the information.

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