You've been hired by an unprofitable firm to determine whether it should shut down its operation. The firm currently uses 70 workers to produce 300 units of output per day. The daily wage (per worker) is 100 ETB, and the price of the firm's output is 30 ETB. The cost of other variable inputs is 500 ETB per day. Although you don't know the firm's fixed cost, you know that it is high enough that the firm's total costs exceed its total revenue. You know that the marginal cost of the last unit is 30 ETB. Should the firm continue to operate at a loss?
You've been hired by an unprofitable firm to determine whether it should shut down its operation. The firm currently uses 70 workers to produce 300 units of output per day. The daily wage (per worker) is 100 ETB, and the price of the firm's output is 30 ETB. The cost of other variable inputs is 500 ETB per day. Although you don't know the firm's fixed cost, you know that it is high enough that the firm's total costs exceed its total revenue. You know that the marginal cost of the last unit is 30 ETB. Should the firm continue to operate at a loss?
Chapter6: Proudction Costs
Section: Chapter Questions
Problem 8SQ
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You've been hired by an unprofitable firm to determine whether it should shut down its operation. The firm currently uses 70 workers to produce 300 units of output per day. The daily wage (per worker) is 100 ETB, and the price of the firm's output is 30 ETB. The cost of other variable inputs is 500 ETB per day. Although you don't know the firm's fixed cost, you know that it is high enough that the firm's total costs exceed its total revenue. You
know that the marginal cost of the last unit is 30 ETB. Should the firm continue to operate at a loss? Carefully explain your answer.
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