Question: A firm’s product sells for $2 per unit in a highly competitive market. The firm

produces output using capital (which it rents at $75 per hour) and labor (which) is paid a wage of $15 per hour under a contract for 20 hours of labor services).

Complete the following table and use that information to answer the questions that follow.

0 20 0
1 20 50
2 20 150
3 20 300
4 20 400
5 20 450
6 20 475
7 20 475
8 20 450
9 20 400
10 20 300
11 20 150

a. What is the variable cost of producing 475 units of output?

b. How many units of the variable input should be used to maximize profits?

c. What are the maximum profits this firm can earn?