Your firm currently uses 69 workers to produce 330 units of output per day. The

Question

Your firm currently uses 69 workers to produce 330 units of output per day. The daily wage (per worker) is $100, and the price of teh firm's output is $30. The cost of other variable inputs is 100 per day. Fixed costs are $2100 per day. What is the total cost? What is the average cost? What is variable cost? What is average variable cost? Is the firm profitable? Should it stay in business? Should it stay in business in the short run? Should it stay in business in the long run? Show your work and explain answer.

Explanation / Answer

total cost = 69 * 100 + 100 + 2100 = 9100.

average cost = 9100/330 = $27.58

variable cost is 69 * 100 + 100 = $7,000

average variable cost = 7000/330 = $21.21

yes the firm is profitable as 30 > 27.58 and yes the firm should stay in the business both in the short and the long run.

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