2. Mark's Gutters Washing Service is a small business that operates in the perfectly competitive residential...

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Question

Answer 1

Answer #1

Ans. Short run total cost function, STC = 10.5 + 3Q + 0.5Q^2

=> Marginal Cost, MC = dSTC/dQ = 3 + Q

At profit maximizing level,

Price = MC

=> 16 = 3+Q

=> Q = 13 units

So, Mark must wash13 gutters per day to maximise his profit

At this level, profit is,

Profit = Total Revenue- Short run total cost = Price *Quantity - STC = 16*13 - (10.5 + 3*13 + 0.5*13^2)

=> Profit = $74

Thus, Mark earns a maximum profit of $74 per day

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Answer 2

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