Suppose a firm can produce 70 units of a product, Zenia, by combining labor, land, capital, and entrepreneurial ability, as in the four alternative techniques shown in the table below. Assume further that the firm can hire labor at $3 per unit, land at $3 per unit, capital at $6 per unit, and entrepreneurship at $9 per unit. Refer to the provided table, and suppose that the firm uses production technique D If each of the 70 units of Zenia that are produced sells for $1 apiece, then how much will be the total profits of the firm from 70 units of Zenia?
A) $70
B) $57
C) $13
D) $83

Question

Suppose a firm can produce 70 units of a product, Zenia, by combining labor, land, capital, and entrepreneurial ability, as in the four alternative techniques shown in the table below. Assume further that the firm can hire labor at $3 per unit, land at $3 per unit, capital at $6 per unit, and entrepreneurship at $9 per unit.  Refer to the provided table, and suppose that the firm uses production technique D If each of the 70 units of Zenia that are produced sells for $1 apiece, then how much will be the total profits of the firm from 70 units of Zenia?
A) $70 
B) $57 
C) $13 
D) $83

Quizplus · Accepted Answer

Using production technique D, the firm incurs a total cost of $387 [(30 x $3) + (30 x $3) + (5 x $6) + (5 x $9)]. Selling 70 units of Zenia for $70, the total revenue earned is only $70. Therefore, the total profit is calculated as:

Total profit = Total revenue - Total cost
Total profit = $70 - $387
Total profit = -$317

Since the total profit is negative, it means that the firm is making a loss and not a profit. Therefore, producing Zenia using production technique D is not economically feasible.

The best choice would be to either use production technique A or B, as they both result in a positive total profit.

Suppose a Firm Can Produce 70 Units of a Product