Is the firm is a profitable firm.

Question

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Answer 1

Question

Chapter 7, Problem 1.1P

To determine

Is the firm is a profitable firm.

Expert Solution & Answer

Explanation of Solution

The given information:

The quantity is 20,000 units, the price is $15, and the labor cost is $250,000. The capital worth is $400,000 and the rate of return is 7%.

The economic profit or loss can be calculated as follows:

Profit=(Price×Quantity)−Labor cost−(Capital worth×Rate of return)=(15×20,000)−250,000−(400,000×0.07)=300,000−250,000−28,000=22,000

The profit is 22,000.

Economics Concept Introduction

Economic profit: Economic profit refers to the additional profit after subtracting the opportunity cost from the accounting profit.

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Students have asked these similar questions

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.

A clothing manufacturing firm is deciding whether to invest in a new technology that needs an initial investment of $45,000. This will increase cash flows in the first year by $25,000 and $30,000 in the second year. The firm’s current fixed costs are $9,000 and marginal cost is $15. The firm currently charges $18 per unit. What’s the firm’s contribution margin?

Consider a firm that uses capital and labor as inputs and sells 5,000 units of output per year at the going market price of $10. Also assume that total labor costs to the firm are $45,000 annually. Assume further that the total capital stock of the firm is currently worth $100,000, that the return available to investors with comparable risks is 10 percent annually, and that there is no depreciation. Calculate the economic profit and accounting profit of this firm? Explain your answer.?

Answer 2

Question

Chapter 7, Problem 1.1P

To determine

Is the firm is a profitable firm.

Expert Solution & Answer

Explanation of Solution

The given information:

The quantity is 20,000 units, the price is $15, and the labor cost is $250,000. The capital worth is $400,000 and the rate of return is 7%.

The economic profit or loss can be calculated as follows:

Profit=(Price×Quantity)−Labor cost−(Capital worth×Rate of return)=(15×20,000)−250,000−(400,000×0.07)=300,000−250,000−28,000=22,000

The profit is 22,000.

Economics Concept Introduction

Economic profit: Economic profit refers to the additional profit after subtracting the opportunity cost from the accounting profit.

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Answer 3

Question

Chapter 7, Problem 1.1P

To determine

Is the firm is a profitable firm.

Expert Solution & Answer

Explanation of Solution

The given information:

The quantity is 20,000 units, the price is $15, and the labor cost is $250,000. The capital worth is $400,000 and the rate of return is 7%.

The economic profit or loss can be calculated as follows:

Profit=(Price×Quantity)−Labor cost−(Capital worth×Rate of return)=(15×20,000)−250,000−(400,000×0.07)=300,000−250,000−28,000=22,000

The profit is 22,000.

Economics Concept Introduction

Economic profit: Economic profit refers to the additional profit after subtracting the opportunity cost from the accounting profit.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 7, Problem 1.1P

To determine

Is the firm is a profitable firm.

Expert Solution & Answer

Explanation of Solution

The given information:

The quantity is 20,000 units, the price is $15, and the labor cost is $250,000. The capital worth is $400,000 and the rate of return is 7%.

The economic profit or loss can be calculated as follows:

Profit=(Price×Quantity)−Labor cost−(Capital worth×Rate of return)=(15×20,000)−250,000−(400,000×0.07)=300,000−250,000−28,000=22,000

The profit is 22,000.

Economics Concept Introduction

Economic profit: Economic profit refers to the additional profit after subtracting the opportunity cost from the accounting profit.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 7, Problem 1.1P

To determine

Is the firm is a profitable firm.

Expert Solution & Answer

Explanation of Solution

The given information:

The quantity is 20,000 units, the price is $15, and the labor cost is $250,000. The capital worth is $400,000 and the rate of return is 7%.

The economic profit or loss can be calculated as follows:

Profit=(Price×Quantity)−Labor cost−(Capital worth×Rate of return)=(15×20,000)−250,000−(400,000×0.07)=300,000−250,000−28,000=22,000

The profit is 22,000.

Economics Concept Introduction

Economic profit: Economic profit refers to the additional profit after subtracting the opportunity cost from the accounting profit.

Answer 6

Chapter 7, Problem 1.1P

To determine

Is the firm is a profitable firm.

Expert Solution & Answer

Explanation of Solution

The given information:

The quantity is 20,000 units, the price is $15, and the labor cost is $250,000. The capital worth is $400,000 and the rate of return is 7%.

The economic profit or loss can be calculated as follows:

Profit=(Price×Quantity)−Labor cost−(Capital worth×Rate of return)=(15×20,000)−250,000−(400,000×0.07)=300,000−250,000−28,000=22,000

The profit is 22,000.

Economics Concept Introduction

Economic profit: Economic profit refers to the additional profit after subtracting the opportunity cost from the accounting profit.

Answer 7

Chapter 7, Problem 1.1P

To determine

Is the firm is a profitable firm.

Answer 8

Expert Solution & Answer

Explanation of Solution

The given information:

The quantity is 20,000 units, the price is $15, and the labor cost is $250,000. The capital worth is $400,000 and the rate of return is 7%.

The economic profit or loss can be calculated as follows:

Profit=(Price×Quantity)−Labor cost−(Capital worth×Rate of return)=(15×20,000)−250,000−(400,000×0.07)=300,000−250,000−28,000=22,000

The profit is 22,000.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Economics Concept Introduction

Economic profit: Economic profit refers to the additional profit after subtracting the opportunity cost from the accounting profit.

Answer 12

Ch. 7.A - Prob. 1P Ch. 7.A - Prob. 2P Ch. 7.A - Prob. 3P Ch. 7.A - Prob. 4P Ch. 7.A - Prob. 5P Ch. 7 - Prob. 1.1P Ch. 7 - Prob. 1.2P Ch. 7 - Prob. 1.3P Ch. 7 - Prob. 1.4P Ch. 7 - Prob. 1.5P

Is the firm is a profitable firm.

Is the firm is a profitable firm.

Explanation of Solution

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