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.
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.
Macroeconomics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506756
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
ChapterST3: The Stock Market: Its Function, Performance, And Potential As As Investemtn Opportunity
Section: Chapter Questions
Problem 3CQ
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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.
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