Suppose a firm uses workers and office space to produce output. The firm is locked into a year-long lease on its office space, but it can easily vary the number of employee-hours it uses each day. The table below describes the relationship between the number of employee-hours the firm uses each day and the firm's daily output. Each unit of output sells for $2, the hourly wage rate is $14, and the rent on the office space is $50 per day. $$\begin{array} { | c | c | }
\hline \begin{array} { c }
\text { Employee-Hours } \
\text { Per Day }
\end{array} & \begin{array} { c }
\text { Output } \
\text { Per Day }
\end{array} \
\hline 0 & 0 \
\hline 1 & 40 \
\hline 4 & 80 \
\hline 9 & 120 \
\hline 15 & 160 \
\hline 23 & 200 \
\hline
\end{array}$$ When the firm uses 9 employee-hours, it earns a daily ______ of ______.

Question

Suppose a firm uses workers and office space to produce output. The firm is locked into a year-long lease on its office space, but it can easily vary the number of employee-hours it uses each day. The table below describes the relationship between the number of employee-hours the firm uses each day and the firm's daily output. Each unit of output sells for $2, the hourly wage rate is $14, and the rent on the office space is $50 per day. $$\begin{array} { | c | c | } 
\hline \begin{array} { c } 
\text { Employee-Hours } \
\text { Per Day }
\end{array} & \begin{array} { c } 
\text { Output } \
\text { Per Day }
\end{array} \
\hline 0 & 0 \
\hline 1 & 40 \
\hline 4 & 80 \
\hline 9 & 120 \
\hline 15 & 160 \
\hline 23 & 200 \
\hline
\end{array}$$ When the firm uses 9 employee-hours, it earns a daily ______ of ______.

Quizplus · Accepted Answer

The firm's revenue when using 9 employee-hours is 120 units * $2 = $240. The cost is 9 hours * $14/hour + $50 rent = $176. The profit is $240 - $176 = $64.

Suppose a Firm Uses Workers and Office Space to Produce