Jason, a high -school student, mows lawns for families In his neighbourhood. The

Question

Jason, a high -school student, mows lawns for families In his neighbourhood. The going rate is $12 for each lawn-mowing service. lesson would like to charge $20 because he believes he has more experience mowing lawns than the many other teenagers who also offer the same service. If the market for lawn mowing services is perfectly competitive, what would happen If mason raised his price? The table above shows the short-run cost data of a perfectly competitive firm that produces plastic camera cases. Assume that output can only be increased in batches of 100 units. a. What is the fixed cost of production? b. If the market price of each camera case is $8. what is the profit-maximizing quantity? c. If the firm maximizes profit, what is the amount of the firm's profit or loss? d. Suppose the fixed cost of production rises by $500 and the price per unit is still $8. Does the firm's profit-maximizing output level rise, fall, or stay the same? Suppose Veronica sells teapots in the perfectly competitive teapot market Her output per day and her costs are as follows: Suppose the current equilibrium price in the teapot market is $10. To maximize profit, how many teapots will Veronica produce, what price will she charge, and how much profit (or loss) will she make? A perfectly competitive firm produces 3, 000 units of a good at a total cost of $36, 000. The fixed cost of production is $20, 000. The price of each good is $10. Should the firm continue to produce in the short run? Why or why not?

Explanation / Answer

1, Since the market for lawn movers is perfectly competitive, if Jason raises his price above the equilibrium price, the demand for his service will drop. Because, there is excess supply than the service actually demanded.

2. The table above shows the short-run costs data of a perfectly competitive firm that produces plastic camera cases.

.a. The fixed cost of production is $1,000

.b. If the market price for each camera case is $8, the profit-maximizing quantity is 300.

.c. If the firm maximizes profit, the amount of the firm’s profit is $440.

.d. If the fixed cost of production rises by $500 and the price per unit is still $8, the firm’s profit-maximizing output level will rise.

3. Suppose the equilibrium price in the teapot market is $10.

To maximize profit, Veronica will produce 6 units per day, and the price she will charge be $15 and she will make $2 profit.

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