1-Lola is the owner of a bakery that earns 0 (zero) economic profit. Last year, her total revenue was $165,000, her rent was $10,000, her labor costs were $85,000, and her overhead expenses were $11,000.
a. What were Lola’s total explicit costs?
b. What were Lola’s total implicit costs?
c. Currently, Lola has 7 employees; with 7 employees, her bakery can produce 8 wedding cakes per day. If she hired a ninth employee, she’d be able to produce 16 wedding cakes per day
.What is the total change in the marginal product, in terms of wedding cakes?
2-a. What is the change in revenues associated with the output effect for this firm when the price decreases from $50 to $30?
b. What is the change in revenues associated with the price effect for this firm when the price decreases from $50 to $30?
c. What is your recommendation for the firm? Should the firm lower the price, or not? Why?
In your response, be sure to fully define all economics terms used.