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

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Definitions:

Financial Statements

Formal records detailing the financial activities and condition of a business, individual, or other entity, presenting its assets, liabilities, income, and expenses in a structured format.

Common Shares

Equity securities that represent ownership in a corporation, entitling holders to vote at shareholder meetings and receive dividends.

P/E Ratio

The ratio for valuing a company that measures its current share price relative to its per-share earnings.

Financial Statements

Official records outlining the financial activities and condition of a business or entity, including the balance sheet, income statement, and cash flow statement.