Consider a simple economy with two companies: Fresh Juice, and Organic Oranges.
ID: 1133693 • Letter: C
Question
Consider a simple economy with two companies: Fresh Juice, and Organic Oranges. Organic Oranges do not sell oranges directly to consumer; rather it supplies its entire harvest to Fresh Juice as an intermediate good. Fresh Juice sells its juice directly to consumers. As juice is perishable, juice produced in Q1 cannot be sold in Q2 Suppose Fresh Juice produced 2,500 gallons of juice in Q1. The two inputs used were oranges, which cost $7500 total, and labor, which cost $25 per gallon of juice. Organic Oranges's only input is labor, which costs $6, 250, total. Fresh Juice sold 1,800 gallons of juice in the first quarter at a price of $50 each. Which of the following correctly matches total corporate profit and wages in the economy in Q1? A. ProfitTotal 20,000; WagesTotal 65,000 B. ProfitTotal 21,000; WagesTotal 67,500 C. ProfitTotal D. ProfitTotal 22,500; WagesTotal67,750 21.250: WagesTotal- - 68,750Explanation / Answer
Ans: ProfitTotal = 21,250 ; WageTotal = 68,750
Explanation:
Wage total = ($25 * 2500) + $6,250 = 68,750
Total Revenue by selling 1,800 gallons in Q1 = $50 * 1,800 = $90,000
Profit Total = $90,000 - $68,750 = $21,250