Suppose a small lumber company operates in Washington State. The production process in this case involves chopping down and processing trees that grow deep in forests throughout the state. The company currently owns 160 axes. Each axe lasts two seasons, meaning the company must replace half of its axes each year. The company owns no other capital goods and uses no other materials. Since each axe can only be used by one worker, the company hires 160 workers. Each worker works 200 hours during the season and produces 5 boards per hour. Each axe costs $800, the hourly wage is $15, and lumber currently sells for $3.85 per board. Assume that all output is sold. 

Calculate the following 

1. Total cost of depreciation and replacement

2. Capital Goods owned

 

Answer rating: 100% (QA)

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