A firms output level is 3,000 units. Their market price for its output is $1.00 per unit. Their production function is q=10*K^.5L^.5
K is fixed at 225 hours and L is 400 hours. the hourly wage rate is $6 and hourly rental rate for K is $8.
Should the firm shutdown?
The cost of production is TC = K*r + w*L = 225*8 + 400*6 = 4200
Total Sales = 3000*1=3000
At current production level the firm is making losses.
To know what is the appropriate decision, let us ...
This posting calculates what is the optimal level of production for the firm.