Purchase Solution

A Discussion of the Principles of Microeconomics

Not what you're looking for?

Ask Custom Question

You have been hired by an unprofitable firm to determine whether it should shut down its unprofitable operation.The firm currently uses 70 workers to produce 300 units of output per day.The daily wage(per worker) is $100 and the price of the firm's output is $30.The cost of other variable input is $500 per day.

Although you don't know the firm's fixed cost, you know that it is high enough that the firm's total cost exceeds its total revenue.

Purchase this Solution
Solution Summary

This solution is comprised of a concise, 240 word response, which explains the concept of the shut-down point and how it can be applied to the specific scenario in question. Basic calculations pertaining to this question have been included.

Solution Preview

We have to consider what is the meaning of the shut down point. The output level at which price equals average variable cost and losses equals the total fixed costs, whether the firm produces or not. Also the lowest point on the AVC curve at which AVC=MC.

Now here Total Variable Cost= $100*70+500=$7500
Average Variable Cost= $7500/300=$25.

The ...

Purchase this Solution
Free BrainMass Quizzes
Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

View More Free Quizzes
Related BrainMass Solutions

  • Federal Government's Role and Market Structures

    The rules of the game for the firm are different in the two markets, but not the rules of microeconomics. Principles of microeconomics are discussed.

  • Microeconomics vs Macroeconomics

    143598 Microeconomics vs Macroeconomics Microeconomics is "the study of the operations of the components of a national economy, such as individual firms, households, and consumers."

  • Problems with invisible hand

    How do the principles of microeconomics that you have leaned in this course apply to other nations? 9.

  • Principles of Microeconomics

    When economies of scale are present, but are not sufficiently large to generate a natural monopoly, the expected market structure is: d. oligopoly Principles of Microeconomics is emphasized.

  • PRINCIPLES OF MICROECONOMICS

    43175 PRINCIPLES OF MICROECONOMICS The microsoft trial has been one of the biggest investigations of antitrust behavior since the turn of the century.

  • Equilibrium price versus equilibrium quantity

    Microeconomics: Principles, problems, and policies. New York: McGraw-Hill Irwin. This solution explains the differences between the equilibrium price and the equilibrium quantity

  • Circular flow, Production Possibilities, and other Concepts

    - The bottom line is that microeconomics takes a bottoms-up approach to analyzing the economy while macroeconomics takes a top-down approach. Note: Please see the attached files (Word document and Powerpoint) for more discussion.

  • PRINCIPLES OF MICROECONOMICS QUESTION

    Along with this as we know that technology has low cost and using technology at right place can help the companies to monitor the employee performance at a most effective level. The principles of microeconomics questions are examined.

  • Principles of Microeconomics: Antitrust Legislation

    43244 Principles of Microeconomics: Antitrust Legislation The Microsoft trial has been one of the biggest investigations of antitrust behavior since the turn of the century .Give your view points of 2 sides: the one that support the government side

View More Related Solutions