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A firm currently uses 40000 workers to produce 180000 units of output per day The daily wage per worker is $100 and the price of the firm's output is $28 The cost of other variable inputs is

A firm currently uses 40,000 workers to produce 180,000 units of output per day. The daily wage per worker is $100, and the price of the firm's output is $28. The cost of other variable inputs is $500,000 per day. (Note: Assume that output is constant at the level of 180,000 units per day.)

Assume that total fixed cost equals $1,200,000. Calculate the values for the following four formulas:

 

  • Total Variable Cost = (Number of Workers x Worker’s Daily Wage) + Other Variable Costs
  • Total Costs = Total Variable Costs + Total Fixed Costs
  • Total Revenue = Price * Quantity
  • Average Variable Cost = Total Variable Cost / Units of Output per Day
  • Average Total Cost = (Total Variable Cost + Total Fixed Cost) / Units of Output per Day

    Complete the following:

    • Calculate the firm’s profit or loss. Is the firm making a profit or a loss?
    • Explain the Short Run Shut Down Rule. Should this firm shut down? Please explain

 

May 16 2020 View more View Less

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