Jim and Lisa own a dog-grooming business in Champlain, New York, called JL Groomers. There are many buyers and many sellers in the dog-grooming service market. JL Groomers experiences normal cost curves, with the marginal cost (MC) curve crossing average variable cost (AVC) at $14 and average total cost (ATC) at $22. JL Groomers will make positive economic profits if the market price is:

Question

Quizplus · Accepted Answer

Since JL Groomers experiences normal cost curves, their profit-maximizing output will occur where marginal cost equals marginal revenue (MR), and this will occur where the marginal cost curve intersects the demand curve. Given that there are many sellers in the market, the demand curve JL Groomers faces is likely to be relatively elastic. Thus, the market price is likely to be below JL Groomers' average total cost of $22. Therefore, JL Groomers will make positive economic profits if the market price is above $22. Hence, the best choice is (E) above $22.

Jim and Lisa Own a Dog-Grooming Business in Champlain, New