Question

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 $30 is total fixed cost. he mows 10 lawns a day. will jack exit the industry in the short-run? why or why not?

Answer 1

Answer: P=27 Q=10 TC=280 TC=FC+VC FC=30 VC=280-30=250 TR=Q*P=10*27=270 Profit=TR-TC=270 - 280= -10 In short-tun Bob should continue mow lawns because he covers fixed costs (overvice instead of loss -10 he would had loss amounting fixed costs - 250) In long-run he should close production.