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# MicroEconomics Unit 3 (Essay Sample)

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Running Head: MICRO ECONOMICS Micro Economics [name of the writer] [name of the institution ] [name of the Professor] [Course] . Abstract The purpose of this paper is to answer the questions related to micro economics. . Micro Economics Assuming that the total fixed cost (TFC) of the firm is \$1,000,000: Total Variable Cost (TVC) = (50000 workers x \$80 wage per worker) + 400,000 = \$4,400,000 Average Variable Cost (AVC) = Total Variable cost / Units of Output per Day = \$ 4,400,000/200,000 units = \$22 per unit Average Total Cost (ATC) = (Total Variable Cost +Total Fixed Cost) / Units of Output per day = (\$4,400,000+ \$1,000,000) / 200,000 units = \$ 27 per unit Worker productivity = Units of Output per Day / Number of Workers =200,000 units/ 50000 workers = 4 units per worker. Assuming that the total fixed cost (TFC) of the firm is now \$3,000,000: Total Variable Cost (TVC) = (50000 workers x \$80 wage per worker) + 400,000 = \$4,400,000 Average Variable Cost (AVC) = \$ 4,400,000/200,000 units = \$22 per unit Average Total Cost (ATC) = (\$4,400,000+ \$3,000,000) / 200,000 units = \$ 37 per unit Worker productivity = 200,000 units/ 50000 workers = 4 units per worker. Profit/Loss = Total revenue – Total cost, where Total revenue = Price of each unit x Total number of units Total cost = Total Variable cost + Total Fixed cost Profit/ (Loss) when TFC is \$1,000,000 = (\$25 x 200,000 units) - (\$4,400,000+ \$3,000,000) = \$5,000,000 – \$ 7,400,000 = -2, 400,000 (Loss) Profit/ (Loss) when TFC is \$3,000,000 = (\$25 x 200,000 units) - (\$4,400,000+ \$1,000,000) = \$5,000,000 – \$ 5,400,000 = - 400,000 (Loss) When deciding whether to shutdown a firm or not, the fixed cost s...
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