Use the Following to Answer Questions

question 48

Multiple Choice

Use the following to answer questions:
-(Table: Variable Costs for Lots) Look at the table Variable Costs for Lots. During the winter, Alexa runs a snow-clearing service in a perfectly competitive industry. Assume that costs are constant in each interval; that is, the variable cost of clearing anywhere from 1 through 10 lots is $200. Her only fixed cost is $1,000 for a snowplow. Her variable costs include fuel, her time, and hot coffee. If the price to clear a lot is $60, what is Alexa's profit or loss at the optimal output?

• A) $3,000
• B) $1,100
• C) $900
• D) $3,850

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Definitions:

Potential Output

The highest level of output of products and services an economy can achieve when all its resources are employed optimally.

Expansionary Gap

A situation where the actual output of an economy exceeds the potential output, typically indicating inflationary pressures.

Actual Output

Actual output refers to the real level of production achieved by an economy at a given time, which may differ from its potential or expected output.

Resource Suppliers

Entities or individuals that provide the essential inputs or resources needed for production, including labor, capital, materials, and technology.