Please use the following information and use it to complete a few calculations, and answer questions in your paper. The paper ought to be written as a brief (1-1.5 pages) report that includes your calculations and a short explanation of what the firm should do if it is making a loss. A firm currently uses 40,000 workers to produce 100,000 units of output per day. The daily wage per worker is $80, and the price of the firm's output is $41. The cost of other variable inputs is $400,000 per day. Assume that total fixed cost equals $900,000. (Note: Assume that output is constant at the level of 100,000 units per day.) Calculate the values for the following variables using the formulas that are given: · 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 · Profit/Loss = Total Revenue – Total Costs Complete the following: · Is the firm making a profit or a loss? · Explain the Short Run Shut Down Rule. Should this firm shut down? Please explain. Be sure to show your work. Include a reference list.
Please use the following information and use it to complete a few calculations, and answer questions in your paper. The paper ought to be written as a brief (1-1.5 pages) report that includes your calculations and a short explanation of what the firm should do if it is making a loss.
A firm currently uses 40,000 workers to produce 100,000 units of output per day.
The daily wage per worker is $80, and the price of the firm's output is $41. The cost of other variable inputs is $400,000 per day. Assume that total fixed cost equals $900,000. (Note: Assume that output is constant at the level of 100,000 units per day.)
Calculate the values for the following variables using the formulas that are given:
· 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
·
·
Complete the following:
· Is the firm making a profit or a loss?
· Explain the Short Run Shut Down Rule. Should this firm shut down? Please explain.
Be sure to show your work. Include a reference list.
A rational producer attempts to maximize the profits generated from production by operating at the level where the marginal revenue to be earned from the last unit produced becomes equal to the marginal cost of producing it.
The pricing decisions vary according to the market structure a firm is operating in. In a competitive market, the price in the short run is adjusted at the level of the marginal cost of production. If this price equals the average total cost of production, the firm breaks even without a net gain or loss. If the price reduces to a level below this, the firm incurs losses in the short run. The operating decision, therefore, depends upon whether the price exceeds the average variable cost of production or not.
Given:
Total Revenue:
Total Variable Cost:
Total Cost:
Profit:
Ans. The firm is currently making a loss.
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