A firm currently uses 50,000 workers to produce 120,000 units of output per day. The daily wage
Question # 00060121
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Updated on: 04/08/2015 10:26 AM Due on: 08/14/2015
A firm currently uses 50,000 workers to produce 120,000 units of output per day. The daily wage per worker is $100, and the price of the firm's output is $48. The cost of other variable inputs is $400,000 per day. (Note: Assume that output is constant at the level of 120,000 units per day.)Assume that total fixed cost equals $900,000. 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.
Provide a report to the management of the firm that discusses what should be done.Be sure to show your work to support the decision that you outline in your report.
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Solution: A firm currently uses 50,000 workers to produce 120,000 units of output per day. The daily wage