(Table: Variable Costs for Lawns) Use Table: Variable Costs for Lawns.During the summer,Alex runs a lawn-mowing service,and lawn-mowing is a perfectly competitive industry.Assume that costs are constant in each interval;so,for example,the marginal cost of mowing each of the lawns from 1 through 10 is $10.Also assume that he can only mow the quantities of lawn given in the table (and not numbers in between) .His only fixed cost is $1,000 for the mower.His variable costs include fuel,his time,and mower parts.If the price for mowing a lawn is $60,how much is Alex's total cost at the profit-maximizing output?

A) $60
B) $1,100
C) $2,400
D) $2,100

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Andrea Garcia · Accepted Answer

Final Answer : D, Explanation :  To find the profit-maximizing output, Alex needs to produce where marginal cost equals price, which is at the level where the marginal cost curve intersects the $60 price line. From the table, we can see that the marginal cost of mowing 40 lawns is $60. So, his profit-maximizing output is mowing 40 lawns.To calculate his total cost at the profit-maximizing output, we need to add his fixed cost to his variable cost at this level. His fixed cost is $1,000 for the mower. His variable cost for mowing 40 lawns is $1,000 (cost for 20 lawns) + $400 (cost for 30 lawns) + $100 (cost for 40 lawns) = $1,500.Therefore, his total cost at the profit-maximizing output is $1,000 (fixed cost) + $1,500 (variable cost) = $2,500. His revenue from mowing 40 lawns is $60 x 40 = $2,400. Hence, his profit at the profit-maximizing output is $2,400 - $2,500 = -$100.Thus, Alex's total cost at the profit-maximizing output is $2,500. The correct answer is D.

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