 # Calculate the firmâ€™s profit

| June 29, 2015

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 Workerâ€™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 firmâ€™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. Get a 5 % discount on an order above \$ 150
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Category: Finance

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