With current technology, suppose a firm is producing 800 loaves of banana bread
ID: 1255618 • Letter: W
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?
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
The firm's total revenue:-
= Price * Quanity
= 1 * 800
= $ 800
The firms's total cost:-
= (5 * 40) + (5 * 60) + (4 * 60) + (1 * 20)
= 200 + 300 + 240 + 20
= $ 760
The firm's profit or loss:-
= Total revenue - Total costs
= 800 - 760
= $ 40 Profit
Conclusion:-
The firm should continue to produce banana bread, as it will result in profit of $ 40.
1) Total revenue of firm $ 800 2) Total costs of firm $ 760 3) Total profits of firm $ 40Related Questions
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