ECO The firm currently uses 50

ECO The firm currently uses 50 - The firm currently uses...

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The 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: Total Variable Cost = (Number of Workers * Worker’s Daily Wage) + Other Variable Costs 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 Worker Productivity = Units of Output per Day / Number of Workers Then, assume that total fixed cost equals $3,000,000, and recalculate the values of the four variables listed above. For both cases, calculate the firm’s profit or loss. For both sets of calculations, compare the firm’s output price and the calculated average variable cost and average total cost. Should the firm shutdown immediately
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This note was uploaded on 05/10/2011 for the course ECO 212 taught by Professor Emil during the Spring '11 term at Aberystwyth University.

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ECO The firm currently uses 50 - The firm currently uses...

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