Microecon Financing in the Manufacturing Sector 50,000 Essay

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Total Length: 330 words ( 1 double-spaced pages)

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Microecon

Financing in the Manufacturing Sector

50,000 workers = 200,000 units

Avg. wage = $80/day

Output price = $25/unit

Other variable costs = $400,000

Total Variable Costs = 50,000 x $80 + $400,000 = $4,400,000

Average Variable Costs = $4,400,000/200,000 = $

Average Total Costs = ($4,400,000 + $1,000,000)/200,000 = $

or ($4,400,000 + $3,000,000)/200,000 = $

Worker Productivity = 200,000/50,000 = 4

With $1,000,000/day in fixed costs at current output and productivity levels, the firm is operating at a loss of $2/unit, or $400,000/day.

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At $3,000,000 in fixed costs, the loss climbs to $12/unit or $2,400,000/day. Variable costs are covered in both scenarios.

Generally speaking, firms will only go into immediate shutdown when their revenue from production will not even cover the variable costs of that production -- when the loss would be greater by producing units than by ceasing production altogether (Bade & Parkin 2009). As the variable.....

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