Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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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
The economic profit or loss can be calculated as follows:
The profit is 22,000.
Economics Concept Introduction
Economic profit: Economic profit refers to the additional profit after subtracting the
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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?
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c.Other things being equal, could this investment be made for a longer term? Shorter term ? Why?
Chapter 7 Solutions
Principles of Economics (12th Edition)
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