A firm currently uses 40,000 workers to produce 180,000 units of output per day. The daily wage per worker is $100, and the price of the firm's output is $28. The cost of other variable inputs is $500,000 per day. (Note: Assume that output is constant at the level of 180,000 units per day.)
To calculate the firm's total cost (TC), you need to consider both the variable costs and the fixed costs.
Variable costs include the cost of labor and other variable inputs. In this case, the cost of labor is given as $100 per worker per day. Since the firm uses 40,000 workers, the total cost of labor per day would be:
Cost of labor = $100 × 40,000 = $4,000,000 per day
The cost of other variable inputs is given as $500,000 per day.
Total variable cost (TVC) = Cost of labor + Cost of other variable inputs = $4,000,000 + $500,000 = $4,500,000 per day
Now, to calculate the firm's total cost, we also need to consider the fixed costs (FC). Fixed costs are costs that do not vary with the quantity of output produced. In this case, the fixed costs are not given, so we cannot calculate the firm's total cost without this information.
Total cost (TC) = Total variable cost (TVC) + Fixed costs (FC)
However, we can calculate the average variable cost (AVC) and average total cost (ATC) using the given information.
Average variable cost (AVC) = Total variable cost (TVC) / Quantity of output
The quantity of output is given as 180,000 units per day, so:
AVC = $4,500,000 / 180,000 = $25 per unit
Average total cost (ATC) = Total cost (TC) / Quantity of output
Again, we don't know the fixed costs, so we cannot calculate the ATC without this information.