Consider a firm that uses capital and labor as inputs and sells 20,000 units of output per year at the going market price of $15. Also, assume that total labor costs to the firm are $250,000 annually. Assume further that the total capital stock of the firm is currently worth $400,000, that the return available to investors with comparable risks is 7 percent annually, and that there is no depreciation. Is this a profitable firm? Explain your answer.
Consider a firm that uses capital and labor as inputs and sells 20,000 units of output per year at the going market price of $15. Also, assume that total labor costs to the firm are $250,000 annually. Assume further that the total capital stock of the firm is currently worth $400,000, that the return available to investors with comparable risks is 7 percent annually, and that there is no depreciation. Is this a profitable firm? Explain your answer.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Consider a firm that uses capital and labor as inputs and sells 20,000 units of output per year at the going market price of $15. Also, assume that total labor costs to the firm are $250,000 annually. Assume further that the total capital stock of the firm is currently worth $400,000, that the return available to investors with comparable risks is 7 percent annually, and that there is no
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