Show full answers and steps to part a) b) & c) 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 perfectly competitive, which means there are large numbers of firms providing window washing services at a given market price P. Each firm produces output at the P=MC level. P=MC is the profit-maximizing condition for each firm in a perfectly competitive market.Short-run marginal cost is calculated by differentiating short-run total cost with respect to q and average variable cost (AVC) is the variable cost per unit of output.Note: “Since you have posted a question with multiple sub-parts, we will provide the solution only to the first three sub-parts as per our Q&A guidelines. Please repost the remaining sub-parts separately.”Differentiate the STC with respect to qShort run marginal cost SMC(q) = 10+0.2qIn the STC(q), 40 is fixed cost.Market price p =$20.Using profit-maximizing condition p =SMC(q)Ran should produce 50 window washing services each month to maximize the profit. Ron's monthly maximum profit is calculated asRon's monthly maximum profit is $210Part a) SMC(q) = 10+0.2q and AVC(q) = 10+0.1qPart b) Ran should produce 50 window washing services each month to maximize the profit. Part c) Ron's monthly maximum profit is $210

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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 + 0.1q2, 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 Ron's should 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]

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 + 0.1q2, 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 Ron's should 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]

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

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Chapter1: Making Economics Decisions

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Show full answers and steps to part a) b) & c)

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 +0.1q2, 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 Ron's should 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 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]

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