Question

John’s lawn mowing service is a small business that acts as a price taker. The prevailing fixed market price of lawn mowing is $20 per acre. John’s costs are given by: Total Cost (TC) = 0.1q2 + 10q +50.

Marginal cost (MC) = change in TC/change in Q = 0.2q+10.

Where q = the number of acres that John chooses to mow each day.

a. How many acres should John choose to mow in order to maximize profit?

b.Calculate John’s daily profit.

c.Graph these results and label John’s supply curve.

Answer 1

0.2 ca since John is a price takes the market form is PERFECT COMPETITION. Thus, profits are maximized where price = Marginal cost . putting the values, $ 20 = 0.29 +10 20-10 = 0.29 = 10 = 0.29 10.-q 50-91 John should choose to mow 50 acres 1. to maxmise profit. (6) John's daily profit = Total Revenue - Total cost Putting values, TK : 20 x 50 = [0o0 Total cost = 0.1(50)² + 10(50) +50 = 250 + 500+50 -$800 Profit = $1000 - $800 = $200 50 cc) MGO) = 0.210)+10 - MGO) = 10 Thus, lo is yraxis coordinate Price/ cost/ Revenue SUPPLY CRVE Price lung lo 20 30 40 50 60 at