A firm currently uses 40,000 workers to produce 180,000 units per day. The daily wage per worker is $100, and the price of the firm’s output is $28. The cost other variable input is $500,000 per day. (Note assume that output is constant at the level of 180,000 units per day.)

Question

Total Variable Cost
Total Cost
Average Variable Cost
Average Total Cost

Answer 1

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
Complete the following:

Answer 2

TVR = 4,500,000
TV = 5,700,000
AVC = 25
ATC =11.4