Show full answers and steps to part d) e) & f) Exercise 5Ron's Window Washing Service is a small business that operates in theperfectly competitive residential window washing industry in Evanston, Illinois. The short-runtotal cost curve is STC (q) = 40 + 10q +0.1q2, where q is the number of windows washed perday. 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 Ron's should produce each month to maximize profits if themarket 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 level of output corresponding to the minimum level of Ron's average variable costcurve? [Hint: At the minimum level of the average variable cost curve, it crosses with theshort-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 isgiven by the minimum level of the average variable cost curve. Plug the value of q youfound 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 theshutdown 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]

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter22: Supply: The Costs Of Doing Business

Section: Chapter Questions

Problem 14E

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