Suppose a Firm Uses Workers and Office Space to Produce

question 105

Multiple Choice

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 ______.

• A)loss; $64
• B)profit; $64
• C)loss; $114
• D)profit; $114

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Definitions:

Marked Down

A reduction in the price of an item or product to encourage sale.

Marked Down

A reduction in the original selling price of goods, often to clear old stock or boost sales.

Clearance Sale

A sale event to clear out inventory, often featuring significant reductions in prices to encourage quick sales.

Cost Price

The total cost incurred to produce or purchase an item before any markup or selling expenses are added.