Lisa's Lawn Company is a lawn-mowing firm in a perfectly competitive market for lawn-mowing services. Table Q2(a) sets out Lisa’s costs and revenue at the market price of RM30 a lawn: Quantity (lawn per hour) Table Q2(a): Costs and Revenues of Lisa’s Lawn Company Marginal Revenue Total Cost (RM) Marginal Cost Total Revenue (RM) (RM) (RM) 30 30 30 40 10 60 90 30 30 55 15 3. 75 20 4 120 30 100 25 5 150 30 130 30 6. 180 30 165 35 (i) Identify the quantity of lawn per hour that maximised the profit earned by the firm. (ii) Calculate the amount of Lisa's maximum profit in the short run. (iii) In the long run a firm in perfect competition makes normal profit which is equal to zero. Explain graphically how free entry and exit brings the economic profit back to normal profit.
Lisa's Lawn Company is a lawn-mowing firm in a perfectly competitive market for lawn-mowing services. Table Q2(a) sets out Lisa’s costs and revenue at the market price of RM30 a lawn: Quantity (lawn per hour) Table Q2(a): Costs and Revenues of Lisa’s Lawn Company Marginal Revenue Total Cost (RM) Marginal Cost Total Revenue (RM) (RM) (RM) 30 30 30 40 10 60 90 30 30 55 15 3. 75 20 4 120 30 100 25 5 150 30 130 30 6. 180 30 165 35 (i) Identify the quantity of lawn per hour that maximised the profit earned by the firm. (ii) Calculate the amount of Lisa's maximum profit in the short run. (iii) In the long run a firm in perfect competition makes normal profit which is equal to zero. Explain graphically how free entry and exit brings the economic profit back to normal profit.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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