Production and Perfect Competition
Production and Perfect Competition
ECON220
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 firm’s 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:
• Total Variable Cost = (Number of Workers * Worker’s Daily Wage) + Other Variable Costs
• 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
• Worker Productivity = Units of Output per Day / Number of Workers
Calculations: Total fixed cost equals $1,000,000
TVC= (number of workers * worker’s daily wage) + other variable costs
TVC= (50,000* 80)+ 400,000
TVC= (4,000,000) + 400,000
TVC= $4,400,000
AVC= total variable cost/ units of output per day
AVC=4,400,000/200,000
AVC=22
ATC= (total variable cost+ total fixed cost) / units of output per day
ATC= (4,400,000+1,000,000)/200,000
ATC= 5,400,000/200,000
ATC= 27
WP= units of output per day/ number of workers
WP= 200,000/50,000
WP=4
Then, assume that total fixed cost equals $3,000,000, and recalculate the values of the four variables listed above.
Calculations: Total fixed cost equals $3,000,000
TVC= (number of workers * worker’s daily wage) + other variable costs
TVC= (50,000* 80)+ 400,000
TVC= (4,000,000) + 400,000
TVC= $4,400,000
AVC= total variable cost/ units of output per day
AVC=4,400,000/200,000
AVC=22
ATC= (total variable cost+ total fixed cost) / units of output per day
ATC= (4,400,000+3,000,000)/200,000
ATC= 7,400,000/200,000
ATC= 37
WP= units of output per day/ number of workers
WP= 200,000/50,000
WP=4
For both cases, calculate the firm’s profit or loss. Total Revenue= price* quantity
TR= 25* 200,000
TR=5,000,000
So in order to get the profit or loss, we need to use the
ECON220
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 firm’s 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:
• Total Variable Cost = (Number of Workers * Worker’s Daily Wage) + Other Variable Costs
• 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
• Worker Productivity = Units of Output per Day / Number of Workers
Calculations: Total fixed cost equals $1,000,000
TVC= (number of workers * worker’s daily wage) + other variable costs
TVC= (50,000* 80)+ 400,000
TVC= (4,000,000) + 400,000
TVC= $4,400,000
AVC= total variable cost/ units of output per day
AVC=4,400,000/200,000
AVC=22
ATC= (total variable cost+ total fixed cost) / units of output per day
ATC= (4,400,000+1,000,000)/200,000
ATC= 5,400,000/200,000
ATC= 27
WP= units of output per day/ number of workers
WP= 200,000/50,000
WP=4
Then, assume that total fixed cost equals $3,000,000, and recalculate the values of the four variables listed above.
Calculations: Total fixed cost equals $3,000,000
TVC= (number of workers * worker’s daily wage) + other variable costs
TVC= (50,000* 80)+ 400,000
TVC= (4,000,000) + 400,000
TVC= $4,400,000
AVC= total variable cost/ units of output per day
AVC=4,400,000/200,000
AVC=22
ATC= (total variable cost+ total fixed cost) / units of output per day
ATC= (4,400,000+3,000,000)/200,000
ATC= 7,400,000/200,000
ATC= 37
WP= units of output per day/ number of workers
WP= 200,000/50,000
WP=4
For both cases, calculate the firm’s profit or loss. Total Revenue= price* quantity
TR= 25* 200,000
TR=5,000,000
So in order to get the profit or loss, we need to use the