Suppose that for a particular firm the only variable input into the production process is labor and that outputequals zero when no workers are hired. in addition, suppose that the average total cost when 5 units of outputare produced is $30, and the marginal cost of the sixth unit of output is $60. what is the average total cost when six units are produced?

Question

Business

Zander Sampson

28 August, 21:43

Suppose that for a particular firm the only variable input into the production process is labor and that outputequals zero when no workers are hired. in addition, suppose that the average total cost when 5 units of outputare produced is $30, and the marginal cost of the sixth unit of output is $60. what is the average total cost when six units are produced?

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Porter Leach · Answer 1

This is the concept of financial arithmetic. To get the average cost when six units we shall proceed as follows;

Total cost of producing 5 units will be:

(average cost) * (number of units)

=5*30

=$150

Given that the marginal cost of producing the sixth unit is $60, then the total cost of producing six units will be:

150+60

=$210