ob's lawn-mowing service is a profit-maximizing, competitive firm. Bob mows lawns for $27 each. His total cost each day is $280, of which $30 is a fixed cost. He mows 10 lawn a day. What can you say about Bob's short-run decision regarding shut down and his long-run decision regarding exit.

Question

ob's lawn-mowing service is a profit-maximizing, competitive firm.  Bob mows lawns for $27 each.  His total cost each day is $280, of which $30 is a fixed cost.  He mows 10 lawn a day.  What can you say about Bob's short-run decision regarding shut down and his long-run decision regarding exit.

economyst · Answer

Take a shot, what do you think? Hint: if a firm's revenue is greater than its variable costs, but less than its total costs, it should stay in business in the short run.