BA 372 Lesson 6 Assignment 5

BA 372 Lesson 6 Assignment 5 - Ashley B. Hilliard...

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Ashley B. Hilliard 258-10-0169 July 5, 2010-October 22, 2010 BA 372 Lesson#6, Assignment5 1. Are market supply curves typically more elastic in the short run or in the long run? Explain. Market supply curves are typically more elastic in the long run supply than short run supply. The long run supply curve measures the quantities of a good or service offered for sale by all sellers potential and actual who could sell in the market. 2. Bob’s lawn-mowing services 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? Since fixed cost is $30, average variable cost is ($280 - $30)/10 = $25, which is less than price, so Bob won’t shut down in the short run. Bob can cover more than the variable cost of production by staying in the business. However in the long run, Bob should exit the industry
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BA 372 Lesson 6 Assignment 5 - Ashley B. Hilliard...

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