Firm's Essay Example | Topics and Well Written Essays - 500 words

Firms - Essay ExampleThis is an important figure to be intimate because from this, the revenue price for each(prenominal) product can be calculated. The formula is shown belowTo determine fair organic Cost, we need to add the summarise Fixed Cost to the above equation. The Total Variable Cost and Total Fixed Cost are summed together and divided by the units of payoff per day. This figure is another important number to know because it can be added together with the Average Variable Cost to determine the cost per unit. In this case, it would be $49 ($22+$27). The formula for Average Total Cost is displayed belowTo find out Worker Productivity, we simply take the units of output per day and divide it by the number of workers. This will give us the number of units that each worker produces each day. This formula is shown belowBoth sets of calculations render the firms output price at $25 and the Average Variable Cost at $22. The difference is in the Average Total Cost. The first s cenario has ATC at $27, while the second scenario has an ATC of $37. However, in both of these cases, the AVC is lower that the output price. Because of this, the firm should not be shut down immediately in either case.In terms of break-even numbers, we need to divide the total loss by the daily wage of each worker. For the first example, the $400,000 loss would be divided by $80 per worker (400,000/80), which equals 5,000 workers. If 5,000 workers were laid off, it would leave a workforce of 45,000. If we prehend that toil remains steady at 200,000 units per day, this means that Worker Productivity would have to increase from 4 units per day to 4.4 units per day (200,000/45,000).The second case would have a loss of $2,400,000 divided by $80 per worker (2,400,000/80), which would result in a loss of 30,000 workers, leaving the workforce at 20,000 workers. If we assume that production output (200,000 units) remains the same, then each worker would have to produce 10 units per