Variable Cost - Cost 1 Variable Cost Joe White American...

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Cost 1 Variable Cost Joe White American InterContinental University
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Cost 2 A firm currently uses 50,000 workers to produce 200,000 units of output per day. The daily wage per worker is $80, and the price of the firm's output is $25. The cost of other variable inputs is $400,000 per day. Although you do not know the firm's fixed cost, you know that it is high enough that the firm's total costs exceed its total revenue. Assume that total fixed cost equals $1,000,000. Calculate the values for the following four formulas: Q: Total Variable Cost = (Number of Workers * Worker's Daily Wage) + Other Variable Costs A: (50,000*80) + 400,000 4,400,000 = 4,000,000 +400,000 Total Variable Cost = $4,400,000 Q: Average Variable Cost = Total Variable Cost / Units of Output per Day A: 22 = 4,400,000 / 200,000 Average Variable Cost = $22 Q: Average Total Cost = (Total Variable Cost +Total Fixed Cost) / Units of Output per Day A: (4,400,000 + 1,000,000) / 200,000 27 = 5,400,000 / 200,000 Average Total Cost = $27
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This note was uploaded on 04/07/2011 for the course ECON 101 taught by Professor Sei during the Spring '11 term at American Academy of Art.

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Variable Cost - Cost 1 Variable Cost Joe White American...

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