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  • Tom Runs A House Cleaning Service

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    Stefano Tumbur
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    Tom runs a house cleaning service with fixed costs of $7 per day and variable costs provided in a table. Based on the information given: 1) Tom's maximum profit of $36 occurs when he cleans 8 houses. 2) Tom will break even at a price of $9 per house. 3) Tom will produce as long as price covers average variable cost, which is minimum at $1.75. 4) Tom will shut down if price falls below $1.75. 5) Tom's short-run supply curve is represented by his marginal cost curve lying above his average variable cost curve.

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    Tom runs a house cleaning service

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    Tom runs a house cleaning service with fixed costs of $7 per day and variable costs provided in a table. Based on the information given: 1) Tom's maximum profit of $36 occurs when he cleans 8 houses. 2) Tom will break even at a price of $9 per house. 3) Tom will produce as long as price covers average variable cost, which is minimum at $1.75. 4) Tom will shut down if price falls below $1.75. 5) Tom's short-run supply curve is represented by his marginal cost curve lying above his average variable cost curve.

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    54 views4 pages

    Tom Runs A House Cleaning Service

    Uploaded by

    Stefano Tumbur
    Tom runs a house cleaning service with fixed costs of $7 per day and variable costs provided in a table. Based on the information given: 1) Tom's maximum profit of $36 occurs when he cleans 8 houses. 2) Tom will break even at a price of $9 per house. 3) Tom will produce as long as price covers average variable cost, which is minimum at $1.75. 4) Tom will shut down if price falls below $1.75. 5) Tom's short-run supply curve is represented by his marginal cost curve lying above his average variable cost curve.

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    of 4

    1. Tom runs a house cleaning service. He's fixed c...

    chegg.com/homework-help/questions-and-answers/1-tom-runs-house-cleaning-service-s-fixed-costs-7-per-day-
    variable-costs-provided-followin-q56805692

    Question

    (0)

    Expert Answer

    This solution was written by a subject matter expert. It's designed to help students like
    you learn core concepts.

    Q VC TC= ATC = AVC=VC/Q MC=Change in TR = Profit=


    VC+7 TC/Q TC/Change in Q Q*9 TR-TC

    1/4
    0 0 7 0 -7

    1 2 9 9.00 2.00 2 9 0

    2 3.5 10.5 5.25 1.75 1.5 18 7.5

    3 5.5 12.5 4.17 1.83 2 27 14.5

    4 8 15 3.75 2.00 2.5 36 21

    5 11 18 3.60 2.20 3 45 27

    6 15 22 3.67 2.50 4 54 32

    7 21 28 4.00 3.00 6 63 35

    8 29 36 4.50 3.63 8 72 36

    9 39 46 5.11 4.33 10 81 35

    a. From the above table we can observe that the Tom will build 8 house and $36 is his
    profit, shown in the below graph

    2/4
    b. Tom will just break even at price $9 for producing one unit of good (It is the point where
    TR=TC =0

    c. A firm will produce if the price is able to cover the AVC and here Tom will produce till
    minimum AVC which is $1.75 in short run

    d. If the price is below minimum AVC, then the firm will shut down which is at $1.75

    e. MC curve above AVC curve represents the Tom's short run individual supply curve

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