Answer the question on the basis of the following information for Manfred's Shoe Shine Parlor.Assume Manfred hires labor,its only variable input,under purely competitive conditions.Shoe shines are also sold competitively. $\begin{array}{c}
\begin{array}{c}
\text {Units of}\
\underline{\text {Labor}}\
0\
1\
2\
3\
4\
5\
6\
7
\end{array}
\begin{array}{c}
\text {Total}\
\underline{\text {Product}}\
0\
14\
\
30\
35\
39\
\
44
\end{array}
\begin{array}{c}
\text {Marginal}\
\underline{\text {Product}}\
\
14\
10\
\
\
\
\
2
\end{array}
\begin{array}{c}
\text {Total}\
\underline{\text {Revenue}}\
\
\$ 42 \
\
90\
\
117\
126\
132
\end{array}
\end{array}$
Refer to the given data.If the wage rate is $11 and Manfred's only fixed input is capital,the total cost of which is $30,then what will be his economic profit?
A) $62.
B) $42.
C) $28.
D) $32.

Question

Answer the question on the basis of the following information for Manfred's Shoe Shine Parlor.Assume Manfred hires labor,its only variable input,under purely competitive conditions.Shoe shines are also sold competitively. $\begin{array}{c}
\begin{array}{c}
 \text {Units of}\
\underline{\text {Labor}}\
0\
1\
2\
3\
4\
5\
6\
7
\end{array}
\begin{array}{c}
\text {Total}\
\underline{\text {Product}}\
0\
14\
\
30\
35\
39\
\
44
\end{array}
\begin{array}{c}
\text {Marginal}\
\underline{\text {Product}}\
\
14\
10\
\
\
\
\
2
\end{array}
\begin{array}{c}
\text {Total}\
\underline{\text {Revenue}}\
\
\$ 42 \
\
90\
\
117\
126\
132
\end{array}
\end{array}$
  Refer to the given data.If the wage rate is $11 and Manfred's only fixed input is capital,the total cost of which is $30,then what will be his economic profit?
A) $62.
B) $42.
C) $28.
D) $32.

Quizplus · Accepted Answer

To find the economic profit, we need to first calculate the total variable cost (TVC), which is given by:

TVC = Wage rate x Units of labor

Using the given data, we can fill in the TVC column as follows:

$\begin{array}{c}
\begin{array}{c}
 \text {Units of}\
\underline{\text {Labor}}\
0\
1\
2\
3\
4\
5\
6\
7
\end{array}
\begin{array}{c}
\text {Total}\
\underline{\text {Product}}\
0\
14\
\
30\
35\
39\
\
44
\end{array}
\begin{array}{c}
\text {Marginal}\
\underline{\text {Product}}\
\
14\
10\
\
\
\
\
2
\end{array}
\begin{array}{c}
\text {Total}\
\underline{\text {Revenue}}\
\
\$ 42 \
\
90\
\
117\
126\
132
\end{array}
\begin{array}{c}
\text {Total}\
\underline{\text {Variable Cost}}\
\
\$ 0 \
11\
22\
33\
44\
55\
66\
77
\end{array}
\end{array}$

Next, we can calculate the total cost (TC) as the sum of fixed cost and variable cost:

TC = $30 + TVC

$\begin{array}{c}
\begin{array}{c}
 \text {Units of}\
\underline{\text {Labor}}\
0\
1\
2\
3\
4\
5\
6\
7
\end{array}
\begin{array}{c}
\text {Total}\
\underline{\text {Product}}\
0\
14\
\
30\
35\
39\
\
44
\end{array}
\begin{array}{c}
\text {Marginal}\
\underline{\text {Product}}\
\
14\
10\
\
\
\
\
2
\end{array}
\begin{array}{c}
\text {Total}\
\underline{\text {Revenue}}\
\
\$ 42 \
\
90\
\
117\
126\
132
\end{array}
\begin{array}{c}
\text {Total}\
\underline{\text {Variable Cost}}\
\
\$ 0 \
11\
22\
33\
44\
55\
66\
77
\end{array}
\begin{array}{c}
\text {Total}\
\underline{\text {Cost}}\
\$ 30 \
41\
52\
63\
74\
85\
96\
107
\end{array}
\end{array}$

Finally, we can calculate the economic profit as the difference between total revenue and total cost:

Economic Profit = Total Revenue - Total Cost

$\begin{align*}
Economic Profit &= \$132 - \$107 \
&= \$25
\end{align*}$

Therefore, the economic profit is $25, which is option D.

Answer the Question on the Basis of the Following Information