Question

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?

Answer 1

The total revenue is $800 while the total cost is $780, and the profit is $20.The firm will continue to produce banana loaves and resources will flow towards the bakery

Explanation:

The number of loaves produced by the firm=400

Selling price per unit is $2

Revenue will be: 400*$2=$800

Total cost will be calculated as;

Labor 5 units @$40 = 5*$40=$200

Land is 7 units @$60= 7*$60=$420

Capital is 2 units @$60=$120

Entrepreneurial ability 1 unit @$20=1*$20=$20

Total cost =$(200+420+120+20)=$780

Profit= Revenue-total cost= $800-$780=$20

The firm will continue to produce banana loaves because its making a profit of $20

The resources such as labor, land and capital  will flow towards the business as factors of production to produce more profit.Current resources flowing to the business are good though there is room for improvements in terms of more profits.

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Flow of inputs and outputs: brainly.com/question/8858472

Keywords : technology, firm,loaves, least-cost combination, resources, revenue, profit, loss,resources flow, towards, away

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