Is the firm making a profit or a loss

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Reference no: EM131055008

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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.

Reference no: EM131055008

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