Unit 3 Individual Project

Unit 3 Individual Project - Unit 3 I ndividual Project...

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Unformatted text preview: Unit 3 I ndividual Project Abstract This is the authors solutions to the firms problems and his work has been shown so that you can better understand how he came to his conclusion. This will explain his opinions and thoughts on the firms decision. Work Shown In the first case (TFC = $1M): TVC = $4.4M ($4M for wages (50,000 workers x $80 per worker) plus $400,000 other variable inputs AVC = $22 (TVC of $4.4M divided by 200,000 units) ATC = $27 (TVC $4.4M + TFC $1M divided by 200,000 units) Worker productivity = 4 (200,000 units divided by 50,000 workers) Profit/Loss = $400,000 loss (total revenue of 200,000 units times $25 price = $5M minus total cost of $5.4M (total cost can be calculated either by taking ATC times 200,000 units or by taking TVC plus TFC) In the second case (TFC = $3M): TVC unchanged at $4.4M AVC unchanged at $22 ATC = $37 ($4.4M TVC plus $3M TFC divided by 200,000 units) Worker productivity unchanged at 4 Profit/Loss = $2.4M loss (total revenue remains at $5M; total cost = $7.4M) Explanation of Work The shutdown rule is that if a firm can cover total variable costs at some level of...
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This note was uploaded on 11/07/2010 for the course MICROECONO econ220 taught by Professor Johntheodore during the Spring '10 term at AIU Online.

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Unit 3 Individual Project - Unit 3 I ndividual Project...

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