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Homework answers / question archive / A photocopy shop can produce its daily output of 10,000 copies with either of two processes
A photocopy shop can produce its daily output of 10,000 copies with either of two processes. Process A uses 4 workers and 8 photocopy machines. Process B uses 5 workers and 5 photocopy machines.
a. If each worker's daily wage is $90, and the daily rental (as well as wear and tear) of a photocopy machine is $50, the shop's owner will choose Process
(select)
B
A
, because with Process A total daily costs of employing capital and labour are $ and with Process B they are $ .
b. Besides the costs of labour and capital, the owner daily pays $30 in building rent and $10 in business taxes.
The shop's daily explicit costs are therefore $ .
c. If the shop's price per photocopy is $0.10 (i.e. 10 cents), the daily accounting profit is $ .
d. The owner estimates that she could earn $160 a day if she managed another shop instead of her own shop and the $200,000 she invested in her business could earn $30 a day if she put it into her friend's business venture.
The shop's daily implicit costs are $.
The shop's daily economic costs are $.
e. The shop's daily economic profit is $.
f. The owner
( select)
should
should not
consider closing down her business because the shop is making a
( select)
zero
positive
negative
economic profit.
A) If each worker's daily wage is $90, and the daily rental (as well as wear and tear) of a photocopy machine is $50, the shop's owner will choose Process B because with Process A total daily costs of employing capital and labour are = $90*4+$50*8 = $760
and with Process B they are = $90*5+$50*5 = $700
B) Besides the costs of labour and capital, the owner daily pays $30 in building rent and $10 in business taxes.
The shop's daily explicit costs are therefore = $700+30+10 = $740
C) If the shop's price per photocopy is $0.10 (i.e. 10 cents), the daily accounting profit is = (0.1*10,000 - $740) = $260
D) The owner estimates that she could earn $160 a day if she managed another shop instead of her own shop and the $200,000 she invested in her business could earn $30 a day if she put it into her friend's business venture.
The shop's daily implicit costs are = $260+$30 = $290
The shop's daily economic costs are = $740 + $290 = $1,030
E) The shop's daily economic profit is =1000-1030= - $30
F) The owner should not consider closing down her business because the shop is making a negative economic profit.
