Question

Bob’s lawn mowing service is a profit-maximizing competitive firm. Bob mows lawns for $27 each. His total cost each day is $280, of which $30 is a fixed cost. He mows 10 lawns a day. What can you say about Bob’s short-run decision regarding shut down and his long-run decision regarding exit?

Answer 1

Step-by-step explanation:

Total Cost = $280

Fixed Cost = $30

As we know that the the formula

Total variable cost= Total cost - Fixed cost

which means Total Variable cost = $280 - 30$ = $250

Average variable cost can be calculated = Total Variable cost / Quantity

which is = $250/$27

= $9.25