An economy is employing 2 units of capital, 5 units of raw materials, and 8 units of labor to produce its total output of 640 units. Each unit of capital costs $10; each unit of raw materials, $4; and each unit of labor, $3.

If the per unit price of raw materials rises from $4 to $8 and all else remains constant, the per unit cost of production will rise by а bout:

A) 50 percent.

B) 30 percent.

C) 40 percent.

D) 100 percent.

Question

Business

Abel

28 December, 12:18

An economy is employing 2 units of capital, 5 units of raw materials, and 8 units of labor to produce its total output of 640 units. Each unit of capital costs $10; each unit of raw materials, $4; and each unit of labor, $3.

If the per unit price of raw materials rises from $4 to $8 and all else remains constant, the per unit cost of production will rise by а bout:

A) 50 percent.

B) 30 percent.

C) 40 percent.

D) 100 percent.

+2

Answers (1)

Know the Answer?

Dayana Goodman · Answer 1

B 30 percent

Explanation:

Initial cost of production = (2*$10) + (5*$4) + (8*$3) = $20+$20+$24 = $64

New cost of production = (2*$10) + (5*$8) + (8*$3) = $20+$40+$24 = $84

% rise in cost of production = (new cost - initial cost) / initial cost * 100 = (84 - 64) / 64 * 100 = 20/64 * 100 = about 30%