A Factory Producing Calculators Employs Four Workers

question 126

Multiple Choice

A factory producing calculators employs four workers. At current levels of operation each worker produces 40 calculators per week. Assuming labor is the only variable input and the weekly wage is $400 per worker:

• A) average variable cost is $10.
• B) variable cost is $10.
• C) average variable cost is $40.
• D) average fixed cost is $10.

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Definitions:

Inverse Demand

A representation of demand that shows how the quantity demanded of a good or service varies inversely with price.

Total Cost

The sum of fixed and variable costs incurred by a business in producing a particular level of output.

Residual Demand Curve

The demand that remains for a firm's product after accounting for the demand captured by competitors in the market.

Supply Function

The mathematical relationship showing the quantity of a good or service that producers are willing to sell at each possible price.