1-Explain the difference between the price effect and the output effect when a new firm enters a market.
2-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.
What were Lola’s total explicit costs?
What were Lola’s total implicit costs?
Currently, Lola has 8 employees; with 8 employees, her bakery can produce 12 wedding cakes per day. If she hired a ninth employee, she’d be able to produce 16 wedding cakes per day. What is the marginal product, in terms of wedding cakes, of the ninth employee?
Explain the difference between the price effect and the output effect when a new firm enters a market.