A firm has weekly revenue of $1000.
a) The firm's total cost is $1450 per week. The firm will shut down if weekly fixed (sunk) cost is what?
b) The firm's variable cost is $500 and its fixed cost is $800. The firm shuts down if the percentage of fixed costs that is avoidable is greater than
20%, 40%, 60%, or 80%?
Revenue = $1,000
a) Firm shut down when revenue < variable cost or the firm of the price of the product is less than marginal cost.
Total cost = $1,450
Total cost = Variable cost + Fixed cost
If fixed cost is lets say 449 or less, then variable cost would be 1,001 or more which creates a situation of shutting down.
b) Variable cost = $500
Fixed cost = $800
Firm shut down when cost becomes greater than 1,000.
If 20% of the cost is avoidable while 80% is non avoidable, it means that producer will bear 80% of 800 = 640 of fixed cost in any case possible plus variable cost which turns out to be 500 + 640 = 1,140
If 40% of the cost is avoidable while 60% is non avoidable, it means that producer will bear 60% of 800 = 480 of fixed cost in any case possible plus variable cost which turns out to be 500 + 480 = 980
If 60% of the cost is avoidable while 40% is non avoidable, it means that producer will bear 40% of 800 = 320 of fixed cost in any case possible plus variable cost which turns out to be 500 + 320 = 820
If avoidable cost is greater than 20%, firm cost is more than revenue and falling. If it is above revenue, firm will shut down.
A firm has weekly revenue of $1000. a) The firm's total cost is $1450 per week....
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