# A firm currently uses 40,000 workers to produce 100,000 units of output per day. The daily wage per worker is \$80,...

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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
• 5 years ago
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