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Bob’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 lawns a day. What can you say about Bob’s short-run decision regarding shut down and his long-run decision regarding exit?

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Answer:

Explanation:

Total Cost = $280

Fixed Cost = $30

As we know that the the formula

Total variable cost= Total cost - Fixed cost

which means Total Variable cost = $280 - 30$ = $250

Average variable cost can be calculated = Total Variable cost / Quantity

which is  =  $250/$27

              = $9.25

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