Consider a firm that uses capital and labor as inputs and sells 20,000 units of output per year at the going market price of $15. Also assume that total labor costs to the firm are $248,500 annually. Assume further that the total capital stock of the firm is currently worth $400,000, that the return available to investors with comparable risks is 6 percent annually, and that there is no depreciation. Is this a profitable firm? Explain your answer.
A. The firm is not profitable because profit equals $-348,500
B. The firm is profitable because profit equals $51,500.
C. The firm is profitable because profit equals $27,500.
D. The firm is not profitable because profit equals $27,500.
E. The firm is profitable because profit equals $300,000
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