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16 April, 00:48

A firm produces children's bicycles in the short run using two inputs, capital and labor. The quantity of capital is fixed and generates a monthly cost of $6,000. The quantity of labor can be varied, and the wage rate per hour of labor is $20. If 400 hours of labor are hired for the month, and 140 bicycles units of output are produced, what is the firm's average total cost for the month

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  1. 16 April, 01:52
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    Average total cost per unit = $100

    Explanation:

    The average total cost is the the total cost divided y the number of units

    Average cost = (Total variable cost + Total fixed cost) / Number of units

    Total variable cost = (20 * 400) = 8000

    Total fixed cost = 6,000

    Average total cost = (8000 + 6000) / 140 = $100

    Average total cost per unit = $100
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Home » Business » A firm produces children's bicycles in the short run using two inputs, capital and labor. The quantity of capital is fixed and generates a monthly cost of $6,000. The quantity of labor can be varied, and the wage rate per hour of labor is $20.
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