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    Short run, long run planning for sample company

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    Output= 2000 unit
    Total Fixed Cost= $4000
    Price of Labor= $80
    price of Capital= $320
    Marginal Product of Labor= 20
    Marginal Product of Capital= 80
    Price of output= $8
    Long Run Marginal Cost= $8
    Average Product of labor= 40

    What Advice should be given for Short run and Long run and why? If output rises $10 dollar more what gonna happen in Short run and Long run ?

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    Solution Preview

    In the short run, the firm shuts down if the revenue it gets from producing is less than the variable cost of production.
    <br>Shut down if P &lt; AVC
    <br>Total Labor = Total Units/ APL = 2000/40 = 50
    <br>Total Cost of Labor = 80*$50 = $4000 (= TVC, because ...

    Solution Summary

    The expert analyzes the short run and long run planning for a sample company. The average product of labor is given.