MICROECONOMICS >IA<
FD Edition
ISBN: 9781260511055
Author: McConnell
Publisher: MCG
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Chapter 2, Problem 3P
To determine
The profit of the bread production.
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With current technology, suppose a firm is producing 400 loaves of banana bread daily. Also assume that the least-cost combination of resources in producing those loaves is 5 units of labor, 7 units of land, 2 units of capital, and 1 unit of entrepreneurial ability, selling at prices of $40, $60, $60, and $20, respectively. If the firm can sell these 400 loaves at $2 per unit, what is its total revenue? Its total cost? Its profit or loss? Will it continue to produce banana bread? If this firm’s situation is typical for the other makers of banana bread, will resources flow toward or away from this bakery good?
With current technology, suppose a fifirm is producing 400 loaves of banana bread daily. Also assume that the least-cost combination of resources in producing those loaves is 5 units of labor, 7 units of land, 2 units of capital, and 1 unit of entrepreneurial ability, selling at prices of $40, $60, $60, and $20, respectively. If the fifirm can sell these 400 loaves at $2 per unit, will it continue to produce banana bread? If this fifirm’s situation is typical for the other makers of banana bread, will resources flow to or away from this bakery good?
Answer the following questions on the basis of this information for a single fifirm: total cost of capital = $1000; price paid for labor = $12 per labor unit; price paid for raw materials = $4 per raw-material unit. a. Suppose the firm can produce 5000 units of output by combining its fixed capital with 100 units of labor and 450 units of raw materials. What are the total cost and average total cost of producing the 5000 units of output?b. Now assume the firm improves its production process so that it can produce 6000 units of output by combining its fixed capital with 100 units of labor and 450 units of raw materials. What are the total cost and average cost of producing the 6000 units of output?c. Refer to your answers to 8a and 8b and explain how process innovation can improve economic efficiency.
Chapter 2 Solutions
MICROECONOMICS >IA<
Ch. 2.2 - Prob. 1QQCh. 2.2 - Prob. 2QQCh. 2.2 - Prob. 3QQCh. 2.2 - Prob. 4QQCh. 2 - Prob. 1DQCh. 2 - Prob. 2DQCh. 2 - Prob. 3DQCh. 2 - Prob. 4DQCh. 2 - Prob. 5DQCh. 2 - Prob. 6DQ
Ch. 2 - Prob. 7DQCh. 2 - Prob. 8DQCh. 2 - Prob. 9DQCh. 2 - Prob. 10DQCh. 2 - Prob. 11DQCh. 2 - Prob. 12DQCh. 2 - Prob. 13DQCh. 2 - Prob. 1RQCh. 2 - Prob. 2RQCh. 2 - Prob. 3RQCh. 2 - Prob. 4RQCh. 2 - Prob. 5RQCh. 2 - Prob. 6RQCh. 2 - Prob. 7RQCh. 2 - Prob. 8RQCh. 2 - Prob. 1PCh. 2 - Prob. 2PCh. 2 - Prob. 3PCh. 2 - Prob. 4P
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