Question

Suppose that a company currently employs 2 comma 500 workers and produces 4 million units of output per month. Labor is its only variable​ input, and the company pays each worker the same monthly wage. The​ company's current total variable costs equal ​$5 million. 1.What are average variable costs at this​ firm's current output​ level? ​$ nothing. ​(Your answer should have two decimal place.​) 2.What is the average product of​ labor? nothing. ​(Your answer should be rounded to two decimal places.​) 3.What monthly wage does the firm pay each​ worker? ​$ nothing. ​(Your answer should be roudned to the nearest penny.​)

Answer 1

1) 1.25

2) 1600.00

3) 250,000 pennies

Step-by-step explanation:

Given:

•Number of workers, n = 2,500

•Output per month =4,000,000 units

•Current total variable costs = $5,000,000

1) For average variable costs:

Average variable costs =

Total variable costs/output.p.month

=
`($5,000,000)/(4,000,000)`

= 1.25

2) Average product of labour will be:

Average product of labour =

Output per month/n

`= (4,000,000)/(2,500)`

= 1,600.00

3) Monthly wage for each worker will be given as:

Monhly wage =

Total variable costs/n

Therefore, monthly wage for each worker =

`= (5,000,000)/(2,500)`

= $2,500 => 250,000 pennies