Please help solve all Problem : (a) Jack\'s lawn-mowing service is a profit-maxi

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Please help solve all

Problem : (a) Jack's lawn-mowing service is a profit-maximizing, perfectly competitive firm. Jack mows lawns for $27 each. His total cost each day is $280, of which S30 is total fixed cost. He mows 10 lawns a day. Will Jack exit the industry in the short-run? Why or why not? b Will Jack exit the industry in the long-run? Why or why not? Suppose in a perfectly competitive industry that the market supply and demand forces combine to produce a short-run equilibrium price of $70. Suppose further that a single firm in this industry has a weekly total cost function expressed by the equation: TC 200+ 25q-6q (1/3)q3. (a) Calculate the equations facing the firm: demand, MR, and AR. (b) Calculate the following cost equations of this firm: TFC, TVC, AFC, AVC, MC, and ATC. (c) What is this firm's profit maximizing level of output? What are its profits? (d) At what level of () will this firm shut down its operations?

Explanation / Answer

First question is answered below

1.

Short run condition: Continue operations as long as P > AVC

In the given case, P = 27

AVC = (TC-FC)/Q = (280-30)/10 = 25

Since here P > AVC, the firm should continue operations in the short run.

2.

Long run condition: Continue operations as long as P > ATC

In the given case, P = 27

ATC = 280/10 = 28

Since here P < ATC, the firm should shut down operations in long run.

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