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Economics, Other
Year 3

I want to know if I'm on the right path or not


this is a question to one of my homework assignments

QUESTION: The firm currently uses 70 workers to produce 300 units of output per day. The daily wage (per worker) is $100, and the price of the firm's output is $30. The cost of other variable inputs is $500 per day. Although you don't know the firm's fixed cost, you know that it is high enough that the firm's total costs exceed its total revenue.

MY ANSWER:
The cost of the variable inputs is (70)(100)+500=7500. Revenues resulting from these inputs are (300)(30)=9000. Thus, the benefit of keeping the operation alive is 9000-7500=1500. So although the firm is losing money as a result of the fixed cost, it would lose even more money if it were to fire its workers and shut down the operation

By OTA:  Mutasem Sinnokrot, PhD

OTA Rating:  4.9/5

Your Price:  $2.19  (original value ~$7.98)

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