a) What is the ATC of washing from one to six cars per hour using production method 1 and production method 2? Draw a graph of the Long-run Average total cost of washing from one to six cars per hour. How many cars would Phil need to expect to wash per hour for it to be optimal for his business to use production method 2? Phil's business operates in a monopolistically competitive market. Demand for car washes from his firm is: Price Quantity demanded 11 10 9 8 7 6 LO 5 0 1 2 3 4 5 6 b) Suppose Phil is using production method 1. Assume that his business must set the same price for each car wash. What will be the profit-maximising price for him to choose? Will Phil be willing to operate his business in the short-run?

a) What is the ATC of washing from one to six cars per hour using production method 1 and production method 2? Draw a graph of the Long-run Average total cost of washing from one to six cars per hour. How many cars would Phil need to expect to wash per hour for it to be optimal for his business to use production method 2? Phil's business operates in a monopolistically competitive market. Demand for car washes from his firm is: Price Quantity demanded 11 10 9 8 7 6 LO 5 0 1 2 3 4 5 6 b) Suppose Phil is using production method 1. Assume that his business must set the same price for each car wash. What will be the profit-maximising price for him to choose? Will Phil be willing to operate his business in the short-run?

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter8: Cost Analysis

Section: Chapter Questions

Problem 5E

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