Assignment 10

1. Connor operates a lawn-mowing business in a perfectly competitive market. Connor mows each lawn for $27. His total cost every day is $280, of which $30 is his fixed cost (cost of equipment). On an average day, he mows 5 lawns per day. Is Connor maximizing his profits in the long run and or in the short run? What would be your suggestion to him regarding his business? What if he charged $60 per lawn and mowed 5 lawns? What if he mowed 10 laws instead of 5 and charged $27 per lawn?
2. Imagine a competitive firm operating in a perfectly competitive market. The current market price for its product is $30 per unit. This firm's total cost varies with production. It has fixed costs of $500 and incurs variable costs for each unit it produces. Let's examine its production decisions. A)The firm's fixed costs are $500. Explain how these fixed costs affect the short-run versus long-run production decisions of this firm. B)If the firm's variable costs for each additional unit of output are always $20 per unit, what is its marginal cost of production? C) At the current market price of $30 per unit, should the firm produce in the short run? If so, how much should it produce to maximize profits? D)If the market price drops to $20 per unit, how will this change the firm's short-run production decision? How would the firm behave in the long-run at this price? Explain.
3. Suppose that the market for cantaloupes is currently in long-run equilibrium at a price of $3 per melon. A listeria outbreak in cantaloupe crops leads to a sharp decline in the demand for cantaloupes. A) In the short-run, what will happen to the price of a cantaloupe? Explain and use a graph to illustrate your answer. B)In the short-run, how will firms respond to the change in the price described in part (a)? What will happen to each producer's profits in the short run? Explain your answer using a graph. C)Given the situation described in (b), what can we expect to happen to the number of producers in the cantaloupe industry in the long-run? Why? D)What will the long run equilibrium price of a cantaloupe be? Show your solution in a graph.

Usehttps://www.autodraw.com/ to illustrate the graph. Save and attach the graph to your submission.