Assume you have been hired as a managing consultant by a company to offer some advice that will help it make a decision as to whether it should shut down completely or continue its operations. It currently uses 100 workers to produce 6,000 units of output per month (working 20 days / month). The daily wage (per worker) is $70, and the price of the firm's output is $32. The cost of other variable inputs is $2,000 per day. You are told that the firm's fixed cost is

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Sixta KovacekLv2

5 Aug 2019

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3. You've been hired by an unprofitable firm to determine whether it should shut down its operation. 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. You know that the marginal cost of the last unit is $30. Should the firm continue to operate at a loss? Explain your answer.

raspberrygiraffe891

You've been hired by an unprofitable firm to determine whether it should shut down its operation. 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. You know that the marginal cost of the last unit is $30. Should the firm continue to operate at a loss? Carefully explain your answer.

carminesnail415

The firm currently uses 50,000 workers to produce 200,000 units of output per day. The daily wage per worker is $80, and the price of the firmâs output is $25. The cost of other variable inputs is$400,000 per day.
Assume that total fixed cost equals $1,000,000. Calculate the values for the following four formulas:
â¢ Total Variable Cost = (Number of Workers * Workerâs Daily Wage) +Other Variable Costs
â¢ Average Variable Cost = Total Variable Cost / Units of Output per day
â¢ Average Total Cost = (Total Variable Cost +Total Fixed Cost) /Units of Output per Day
â¢ Worker Productivity = Units of Output per Day / Number ofWorkers
Then, assume that total fixed cost equals $3,000,000, and recalculate the values of the four variables listed above.
For both cases, calculate the firmâs profit or loss.

For both sets of calculations, compare the firmâs output price and calculated average variable cost and average total cost. Should the firm shut down immediately when the total fixed cost equals$1,000,000? Should the firm shut down immediately when the total fixed cost equals $3,000,000?
For one of the cases, if the firm can operate at a loss in the short-run, how many employees need to be laid off in order for the company to break even? To calculate the number of workers to be laid off, divide the loss for the two situations by the daily wage per worker. Given a lower number of employees now working at the company, what is the change in worker productivity? Is the change in workers too large, and the firm should shut down immediately? Orin your opinion, can the workers increase their productivity, assuming that the units of output per day remain fixed at 200,000units so that the firm operates at a breakeven state?