Suppose Melody owns a business giving piano lessons. Assume that the market for piano lessons is perfectly competitive and that the equilibrium price of a piano lesson is $20. Melody’s total costs vary depending on the number of piano lessons she offers each day, as shown in the table below.
|
Number of lessons per day |
Total cost per day ($) |
|
0 |
30 |
|
1 |
50 |
|
2 |
68 |
|
3 |
78 |
|
4 |
96 |
|
5 |
115 |
|
6 |
138 |
|
7 |
168 |
|
8 |
208 |
a. When Melody gives 3 lessons per day, what is her average variable cost?
b. What is the profit-maximizing number of lessons for Melody to give each day?
c. What is Melody’s daily economic profit at her profit-maximizing number of lessons?
