A firm’s product sells for $2 per unit in a highly competitive market. The firm produces output using capital (which is rented at $75 per hour) and labor (which is paid a wage of $15 per hour under a contract for 20 hours of labor services). Complete the following table and use the information to answer the questions that follow. KLQMPKAPKVMPK0200 12050 220150 320300 420400 520450 620475 720475 820450 920400 1020300 1120150 (a) Identify the fixed and variable inputs(b) What are the firm's fixed costs?(c) What is the variable cost of producing 475 units of output?(d) How many units of the variable input should be used to maximize profits?(e) What are the maximum profits this firm can earn?(f) Over what range of the variable input usage do increasing marginal returns exist?(g) Over what range of the variable input usage do decreasing marginal returns exist?(h) Over what range of the variable input usage do negative marginal returns exist? Describe everything With proper explanation.

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FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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A firm’s product sells for $2 per unit in a highly competitive market. The firm produces output using capital (which is rented at $75 per hour) and labor (which is paid a wage of $15 per hour under a contract for 20 hours of labor services). Complete the following table and use the information to answer the questions that follow.

K	L	Q	MP_K	AP_K	VMP_K
0	20	0
1	20	50
2	20	150
3	20	300
4	20	400
5	20	450
6	20	475
7	20	475
8	20	450
9	20	400
10	20	300
11	20	150

(a) Identify the fixed and variable inputs

(b) What are the firm's fixed costs?

(d) How many units of the variable input should be used to maximize profits?

(e) What are the maximum profits this firm can earn?

(f) Over what range of the variable input usage do increasing marginal returns exist?

(g) Over what range of the variable input usage do decreasing marginal returns exist?

(h) Over what range of the variable input usage do negative marginal returns exist?

Describe everything With proper explanation.

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