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    Mashitah Mohamad
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    The firm rents capital at $25 per hour and pays labor $30 per hour for 20 hours of labor services. It sells its product for $4 per unit in a competitive market. To determine costs and profits, the firm needs to calculate its fixed costs from renting capital, variable costs from labor, and revenues from units sold. It can then find the quantity of labor that maximizes profits.

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    The firm rents capital at $25 per hour and pays labor $30 per hour for 20 hours of labor services. It sells its product for $4 per unit in a competitive market. To determine costs and profits, the firm needs to calculate its fixed costs from renting capital, variable costs from labor, and revenues from units sold. It can then find the quantity of labor that maximizes profits.

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    © All Rights Reserved
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    38 views2 pages

    Question 1

    Uploaded by

    Mashitah Mohamad
    The firm rents capital at $25 per hour and pays labor $30 per hour for 20 hours of labor services. It sells its product for $4 per unit in a competitive market. To determine costs and profits, the firm needs to calculate its fixed costs from renting capital, variable costs from labor, and revenues from units sold. It can then find the quantity of labor that maximizes profits.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 2

    A firm’s product sells for $4 per unit in a highly competitive market.

    The firm produces output


    using capital (which it rents at $25 per hour) and labor (which is paid a wage of $30 per hour
    under a contract for 20 hours of labor services). Complete the following table and use that
    information to answer the questions that follow.

    What are the firm's fixed costs?


    What is the variable cost of producing 475 units of output?
    How many units of the variable input should be used to maximize profits?
    What are the maximum profits this firm can earn?
    Over what range of the variable input usage do increasing marginal returns exist?
    Over what range of the variable input usage do decreasing marginal returns exist?
    Over what range of input usage do negative marignal returns exist?

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