Use the Following to Answer Questions

question 177

Multiple Choice

Use the following to answer questions:
-(Table: Variable Costs for Lawns) Look at the table Variable Costs for Lawns. During the summer, Alex runs a lawn-mowing service, and lawn-mowing is a perfectly competitive industry. Assume that costs are constant in each interval; that is, the variable cost of mowing 1 through 10 lawns is $100. His only fixed cost is $1,000 for the mower. His variable costs include fuel, his time, and mower parts. If the price for mowing a lawn is $60, how much is Alex's profit per unit at the profit-maximizing output?

• A) $7.50
• B) $32.50
• C) $20.00
• D) $60.00

---

Definitions:

Adverse Selection

A situation where incomplete or asymmetric information leads to a market failure, typically in insurance markets, where riskier individuals are more likely to select into plans.

Insurance Companies

Organizations that provide financial protection and compensation for losses to individuals and entities in exchange for premiums.

Adverse Selection

A situation where asymmetric information leads to the selection of undesirable alternatives in transactions, commonly seen in insurance markets.

Insurance Companies

Organizations that provide insurance policies to consumers, covering a variety of risks in exchange for premiums.