Final answer:
The widget manufacturer makes a $3 profit on each widget sold and faces $1200 of fixed costs monthly. Workers contribute revenue up to the selling price of widgets they produce, and their wages should reflect this contribution to avoid loss. The total cost includes fixed costs and the marginal costs of additional output.
Step-by-step explanation:
The manufacturer of widgets spends $5 to make each widget and sells them for $8, realizing a profit of $3 per widget. In addition to the variable costs, the manufacturer incurs fixed costs of $1200 each month, which do not change with the level of output produced.
Considering a scenario where a worker can produce two widgets per hour, and each widget is sold for $4, the worker then generates $8 in revenue per hour for the firm.
A profit-maximizing employer will pay the worker up to, but no more than, $8 per hour, as this is the revenue the worker contributes to the firm. However, if widget workers receive $10 per hour, the cost of labor for the firm exceeds the revenue from the widgets sold, leading to a loss on production.
In another example, calculating the cost of producing different levels of output involves multiplying the number of workers by their wage rate and adding any fixed costs, like the fixed costs of a computer company that stands at $250, plus the marginal costs of producing each computer.
The complete question is: the manufracturer of widgets spends $5 to make each widget and sellls them for $8. the manufracturer also has fixed costs each month of 1200 is: