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Flastel currently earns zero economic profit.

by | Nov 11, 2022 | Micro Economics | 0 comments

 

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You are the CEO of the Flastel Corporation. You have requested an analysis of your firm by two economists.In their analyses, both economists agree with the following facts:
Flastel sells a product in a competitive market.
Flastel hires labor, L, from a competitive labor market and it rents capital, K, from a competitive capital market.
Currently L=100 and K=50.
Flastel’s long-run marginal cost of production is less than its long-run average cost of production at Flastel’s current output, Q.
Flastel’s long-run average cost of production is U-shaped (i.e., with economies of scale followed by diseconomies of scale).
Flastel is currently producing output according to the following Cobb-Douglas production function: Q = 157K0.2L0.7.
The wage paid to workers, w, is $10.The rental price of capital, r, is $40.
Flastel currently earns zero economic profit.

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