With current technology suppose a firm is producing 800 loav

With current technology, suppose a firm is producing 800 loaves of banana bread daily. Also assume that the least-cost combination of resources in producing those loaves is 5 units of labor, 5 units of land, 4 units of capital, and 1 unit of entrepreneurial ability, selling at prices of $40, $60, $60, and $20 per unit, respectively.

If the firm can sell these 800 units at $1 per unit, will it continue to produce banana bread?

What is the firm\'s total revenue?

What is the firm\'s total cost?

What is the firm\'s profit or loss?

Instructions: Enter a profit as a positive number and a loss as a negative number; include a negative sign (-) if necessary.

Solution

The firm\'s total revenue:-

  = Price * Quanity

  = 1 * 800

= $ 800

The firms\'s total cost:-

  = (5 * 40) + (5 * 60) + (4 * 60) + (1 * 20)

  = 200 + 300 + 240 + 20

= $ 760

The firm\'s profit or loss:-

= Total revenue - Total costs

  = 800 - 760

  = $ 40 Profit

Conclusion:-

The firm should continue to produce banana bread, as it will result in profit of $ 40.