Economics question help please! I really don't understand where to begin!?

D

Dakota

New member
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 labor, 7 units land, 2 units capital, 1 unit entrepreneurial ability, selling at prices of $40,$60,$60, $20. If the firm can sell these 400 loaves at $2 per unit, will it continue to produce banana bread?If this firm's situation is typical for other makers, will resources flow to or away from this bakery good?
 
5*40=200
7*60=420
2*60=120
1*20=20
cost = $760

revenue= 400*2=800
profit=rev.-total cost =800-760=40

since they are making a profit they will continue to produce, and other firms will flow resources towards this product to make a share of the profits (until the higher quantity drives the price down to cost
 
profit = 400*2 - 5*40 - 7*60 - 2*60 - 1*20

if profit<0, firm should stop producing, and resources will flow away from this industry
if profit>0, the opposite
 
profit = 400*2 - 5*40 - 7*60 - 2*60 - 1*20

if profit<0, firm should stop producing, and resources will flow away from this industry
if profit>0, the opposite
 
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