You're a bakery producing 400 units of bread daily with 5 units of labor, 7 units of land, 2 units of capital, and 1 unit of entrpreneurial abiltiy. The daily cost of each of these inputs is $40 for labor, $60 for land, $60 for capital, and $20 for entrpreneurial ability.
a) What is the economic cost of each loaf produced?
b) If you're selling your bread at $2/loaf, how are you doing? What do you think your bakery will be doing in the future (e.g. expand, keep on as you're doing now, shut down)?
2007-02-20 13:43:06 · 2 answers · asked by Anonymous in Social Science ➔ Economics
a) total cost= 40+60+60+20=$180
180/400=$.45/unit of bread
b)Currently you are selling bread for over 4 times what it costs to make it. Since this is bringing profit, one may expand if in the if in the long run it would truly make bread making cheaper. But staying as you are will be profitable also
2007-02-20 14:50:23 · answer #1 · answered by spamovanemp 1 · 0⤊ 0⤋
The bread costs $1.90 a loaf.
The daily costs are $760 while the daily receipts are $800. Therefore the return on the $760 worth of economic factors is just 5.26%.
This isn't such a great business. It's easily squuezed on its profit margins and other investment opportunities may be very competitive.
2007-02-20 23:01:35 · answer #2 · answered by Voxygen8 4 · 0⤊ 0⤋