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e360_apape_hw4

# e360_apape_hw4 - Economics 360 Microeconomic Theory...

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1 Economics 360: Microeconomic Theory Binghamton University Department of Economics Fall 2008; Prof A. Pape Homework #4 1. John’s Lawn Mowing Service is a small business that acts as a price taker (MR = P). The prevailing market price of lawn mowing is \$20 per acre. John’s costs are given by TC = 0.1q 2 + 10q + 50 MC = 0.2q + 10 where q is the number of acres John chooses to cut a day. a. How many acres should John choose to cut in order to maximize profit? b. Calculate John’s maximum daily profit. c. Graph these results and label John’s supply curve. 2. Consider again the profit-maximizing decision of John’s Lawn Mowing Service from problem 1. Suppose John’s greedy father decides to charge John for the use of the family lawn mower. a. If the lawn mower charge is set at \$100 per day, how will this affect the acres of lawns John chooses to mow? What will his profits be? (Hint: the MC will not change). b.

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e360_apape_hw4 - Economics 360 Microeconomic Theory...

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