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.