Show full answers and steps to part d) e) & f) **Exercise 5:**Ron’s Window Washing Service is a small business that operates in the perfectly competitive residential window washing industry in Evanston, Illinois. The short-run total cost curve is $ STC(q) = 40 + 10q + 0.1q^2 $, where $ q $ is the number of windows washed per day. All fixed costs are sunk (unrecoverable).**a)** Find Ron’s short-run marginal cost curve, $ SMC(q) $, and average variable cost curve, $ AVC(q) $.**b)** How many units of output should Ron produce each month to maximize profits if the market price is $ p = \$20 $? [Hint: Use the profit-maximizing condition]**c)** What is Ron’s maximum monthly profit? [Hint: Use the profit function]**d)** What is the level of output corresponding to the minimum level of Ron’s average variable cost curve? [Hint: At the minimum level of the average variable cost curve, it crosses with the short-run marginal cost curve. Set $ AVC(q) = SMC(q) $ and solve for $ q $]**e)** Find Ron’s shutdown price. [Hint: The shutdown price when all fixed costs are sunk is given by the minimum level of the average variable cost curve. Plug the value of $ q $ you found in part (d) into the $ AVC(q) $. You have found the shutdown price for Ron]**f)** Find Ron’s short-run supply curve. [Hint: Use the shutdown price found in part (e). Ron supplies the profit-maximizing quantity when price is equal or higher than the shutdown price, and zero otherwise]

The short-run total cost of Ron's window washing services: The market for window washing services is…

d) What is level of output corresponding to the minimum level of Ron's average variable cost curve? [Hint: At the minimum level of the average variable cost curve, it crosses with the short-run marginal cost curve. Set AVC (q) = SMC(q) and solve for q] e) Find Ron's shutdown price. [Hint: The shutdown price when all fixed costs are sunk is given by the minimum level of the average variable cost curve. Plug the value of q you found in part (d) into the AVC(q). You have found the shutdown price for Ron] f) Find Ron's short-run supply curve. [Hint: Use the shutdown down price found in part (e). Ron's supplies the profit-maximizing quantity when price is equal or higher than the shutdown price, and zero otherwise]

d) What is level of output corresponding to the minimum level of Ron's average variable cost curve? [Hint: At the minimum level of the average variable cost curve, it crosses with the short-run marginal cost curve. Set AVC (q) = SMC(q) and solve for q] e) Find Ron's shutdown price. [Hint: The shutdown price when all fixed costs are sunk is given by the minimum level of the average variable cost curve. Plug the value of q you found in part (d) into the AVC(q). You have found the shutdown price for Ron] f) Find Ron's short-run supply curve. [Hint: Use the shutdown down price found in part (e). Ron's supplies the profit-maximizing quantity when price is equal or higher than the shutdown price, and zero otherwise]

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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