Question

Bob's Lawn Care Services is a perfectly competitive firm that currently mows 22 lawns a week. Bob's marginal cost exceeds the price he charges. Bob can increase his profit if he

A) charges a higher price.

B) charges a lower price.

C) moves fewer than 22 lawns a week.

D) moves more than 22 lawns a week.

Quantity	Total fixed cost, TFC (dollars)	Total variable cost, TVC (dollars)
0	500	0
1	500	100
2	500	180
3	500	220
4	500	300
5	500	390
6	500	500
7	500	640
8	500	800
9	500	1000
10	500	1250

Answer 1

In a perfectly competitive market, the Marginal cost curve act as a supply curve and a firm produce at a point where the Marginal cost is equal to the price. If the firm is experiencing a loss at the present level of output they will reduce the output at that price.

The answer is "C" mow fewer than 22 laws in a weak. A firm cant charge a higher or lower price in a competitive market because the price is decided by the market forces. If he mows more laws he will face higher MC cost and higher loss.