Given the following production and cost information, construct (make) the referenced cost graphs and answer the discussions questions.
Lisa has a lawn-mowing business. Lisa hires students at $40 a day to mow lawns. Lisa leases 5 lawn mowers for $200 a day. The production and cost schedule for Lisa’s business is outlined below.
Labor (Students per Day) Output (Lawns Cut per Day)
0 0
1 20
2 44
3 70
4 94
5 114
6 118
a) Construct (graph) the average fixed cost, average variable cost, and average total cost.
b) Construct (graph) the corresponding marginal cost schedule.
c) How many lawns should be cut during each day by Lisa’ business to minimize its average total cost or operate most efficiently?
d) Explain why marginal cost schedule tends to increase as more lawns are cut each day.
e) Explain why average fixed cost tends to decrease as more lawns are cut each day.