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-(Table: Variable Costs for Lots) Look at the 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; that is, the variable cost of clearing anywhere from 1 through 10 lots is $200. Her only fixed cost is $1,000 for a snowplow. Her variable costs include fuel, her time, and hot coffee. If the price per cleared lot is $14, how many lots should Alexa clear?

Question

Use the following to answer questions: 
-(Table: Variable Costs for Lots) Look at the 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; that is, the variable cost of clearing anywhere from 1 through 10 lots is $200. Her only fixed cost is $1,000 for a snowplow. Her variable costs include fuel, her time, and hot coffee. If the price per cleared lot is $14, how many lots should Alexa clear?

Quizplus · Accepted Answer

Alexa should not clear any lots because the price per cleared lot ($14) is less than the average variable cost per lot ($200/10 = $20), meaning she would incur a loss on each lot cleared.

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