With current technology, suppose a firm is producing 800 loaves of banana bread

Question

With current technology, suppose a firm is producing 800 loaves of banana bread daily. Also assume that the least-cost combination of resources in producing those loaves is 5 units of labor, 5 units of land, 4 units of capital, and 1 unit of entrepreneurial ability, selling at prices of $40, $60, $60, and $20 per unit, respectively.

If the firm can sell these 800 units at $1 per unit, will it continue to produce banana bread?

(Click to select)NoYes

What is the firm's total revenue?

$

What is the firm's total cost?

$

What is the firm's profit or loss?

Instructions: Enter a profit as a positive number and a loss as a negative number; include a negative sign (-) if necessary.

$

Explanation / Answer

Price per unit(P) =1$/unit , Quantity produced(Q)=800 units

Total revenue=PQ=1(800)=800 $

Units of labor(L)=5, Price of labor(PL)=40

Units of land(La)=5,Price of land(PLa)=60

Units of capital(k)=4,price of capital (Pk)=60

Units if ability(A)=1 ,Price of ability(PA)=20

Total cost=L(PL)+La(PLa)+k(Pk)+A(PA)

=5(40)+5(60)+4(60)+1(20)=760

Firm's profit=total revenue-total cost

=800-760=40

Since profit is positive,so Yes, firm should continue to produce.

Related Questions

Navigate

• Browse (All)
• Browse W
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.