Megan’s Snow Shoveling Service, in which Megan is the only employee, has the following cost schedule. Quantity (sidewalks shoveled per day) Variable Cost Total Cost AVC ATC MC 0 $0 $30 - - - 1 10 40 10 40 10 2 25 55 12.5 27.5 15 3 45 75 15 25 20 4 70 100 17.5 25 25 5 100 130 20 26 30 6 135 165 22.5 27.5 35
Megan’s Snow Shoveling Service, in which Megan is the only employee, has the following cost schedule.
|
Quantity |
Variable Cost |
Total Cost |
|
|
|
|
0 |
$0 |
$30 |
- |
- |
- |
|
1 |
10 |
40 |
10 |
40 |
10 |
|
2 |
25 |
55 |
12.5 |
27.5 |
15 |
|
3 |
45 |
75 |
15 |
25 |
20 |
|
4 |
70 |
100 |
17.5 |
25 |
25 |
|
5 |
100 |
130 |
20 |
26 |
30 |
|
6 |
135 |
165 |
22.5 |
27.5 |
35 |
a) What are Megan’s fixed costs? Given the nature of sidewalk shoveling production, why does Megan’s marginal cost curve look like it does in your graph?
b)Suppose the market price for shoveling a sidewalk is $20 per sidewalk. How many sidewalks will Megan shovel each day to maximize profit?
c)Suppose the market price of shoveling a sidewalk rises to $25 because it has been a snowy winter. How many sidewalks will Megan shovel each day to maximize profit?
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