Lester must pay $200/day rent for his boat even if he shuts down his business and sets no crab pots. One boat is all he can handle alone and he cannot rent the boat to another waterman. He can set 200 crab pots each day. That is all the crab pots the boat will hold. Each pot costs him $20 a day to bait and repair. Each pot, if set, will yield one bushel of crabs each day. Lester can sell all the crabs he can catch for the market price of $25 a bushel and he trying to maximize his profits.

1. What is the output for this business?
2. What are the inputs in this business?
3. Which input(s) is fixed?
4. Which input(s) is variable?
5. What is Lester's daily fixed cost?
6. What is the revenue Lester receives for each individual bushel of crabs he can sell? This is not his total revenue. That will depend on the number of bushels he catches and sells.
7. What is the average revenue per bushel Lester receives for the crabs he can sell?
8. What is the marginal revenue Lester receives for each bushel of crabs he can sell?
9. What is Lester's total cost each day for the crabs he can sell?
10. What is Lester's total variable cost each day for the crabs he can sell?
11. What is Lester's marginal cost of catching a bushel of crabs?
12. What is Lester's average cost each day for the crabs he can sell?
13. What is Lester's average variable cost each day for the crabs he can sell?
14. Place the number of bushels of crabs on the horizontal axis of a two dimensional graph. (Q)
15. Place the $/bushel of crabs on the vertical axis of a two dimensional graph. (P)
16. Draw the demand curve for Lester's business in this graph. Careful.
17. Draw the supply curve for Lester's business in this graph. Careful.
18. Will Lester go crabbing or shutdown his crab business?
19. If Lester goes crabbing, how many crab pots will he set each day?
20. If Lester goes crabbing will he earn a profit? Hint. He probably would not go if he did not earn a profit.
21. What is the amount of profit Lester will earn?
22. What is Lester's profit or loss if he shuts down his crabbing business?
23. What is minimum market price for a bushel of crabs Lester will be willing to accept and continue to remain in the business?
24. What is the minimum market price Lester must receive for a bushel of crabs to earn a profit?
25. If the cost to bait and repair a crab pot rises by $6 will Lester stay in business?