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EverKleen Pool Services provides weekly swimming pool maintenance in Atlanta. Dozens of firms provide this service.
EverKleen Pool Services provides weekly swimming pool maintenance in Atlanta. Dozens of firms provide this service. The service is standardized; each company cleans the pool and maintains the proper levels of chemicals in the water. The service is typically sold as a four- month summer contract. The market price for the four-month ser-vice contract is $115. EverKleen Pool Services has fixed costs of $3,500. The manager of EverKleen has estimated the following marginal cost function for EverKleen, using data for the last two years: SMC = 125 0.42Q + 0.0021Q2 where SMC is measured in dollars and Q is the number of pools serviced each summer. a. Given the estimated marginal cost function, what is the average variable cost function for EverKleen? b. Should the manager of EverKleen continue to operate, or should the firm shut down? Explain. c. The manager of EverKleen finds two output levels that appear to be optimal (i.e. solutions of a quadratic function). What are these levels of output and which one is actually optimal? d. Given the optimal output in c, how much profit (or loss) can the manager of EverKleen Pool Services expect to earn?
