Calculate the firm’s profit

josh
June 29, 2015 0 Comment

A firm currently uses 50,000 workers to produce 120,000 units of output per day. The daily wage per worker is $100, and the price of the firm’s output is $48. The cost of other variable inputs is $400,000 per day. (Note: Assume that output is constant at the level of 120,000 units per day.)Assume that total fixed cost equals $900,000. Calculate the values for the following four formulas: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

Complete the following:Calculate the firm’s profit or loss. Is the firm making a profit or a loss?

Explain the Short Run Shut Down Rule. Should this firm shut down? Please explain.

Provide a report to the management of the firm that discusses what should be done.Be sure to show your work to support the decision that you outline in your report.

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