1. Jason, a high-school student, mows lawns for families in his neighborhood. The going rate is $12 for each lawn-mowing service. Jason would like to charge $20 because he believes he has more experience mowing lawns than the many other teenagers who also offer the same service. If the market for lawn mowing services is perfectly competitive, what would happen if Jason raised his price?

Quantity	Total cost (dollars)	Variable Cost (dollars)
0	$ 1,000	0$
100	1,360	360
200	1,560	560
300	1,960	960
400	2,760	1,760
500	4,000	3,000
600	5,800	4,800

2. The table above shows the short-run cost data of a perfectly competitive firm that produces plastic camera cases. Assume that output can only be increased in batches of 100 units.

a. what is the fixed cost of production?
b. If the market price of each camera case is $8, what is the profit-maximizing quantity?
c. If the firm maximizes profit, what is the amount of the firm's profit or loss?
d. Suppose the fixed cost of production rises by $500 and the price per unit is still $8. Does the firm's profit-maximizing output level rise, fall, or stay the same?

3. Suppose Veronica sells teapot in the perfectly competitive teapot market. Her output per day as her costs are as follows:

Output per Day	Total Cost
0	$ 20
1	32
2	37
3	48
4	61
5	75
6	92
7	113
8	136

Suppose the current equilibrium price in the teapot market is $10. To maximize profit, how many teapots will Veronica produce, what price will she charge, and how much profit (or loss) will she make?

Answer rating: 100% (QA)

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