Suppose That a Firm Has Only One Variable Input, Labor

question 179

Multiple Choice

Suppose that a firm has only one variable input, labor, and firm output is zero when labor is zero. When the firm hires 6 workers the firm produces 90 units of output. Fixed costs of production are $6 and the variable cost per unit of labor is $10. The marginal product of the seventh unit of labor is 4. Given this information, what is the average total cost of production when the firm hires 7 workers?

• A)$10.06
• B)$9.64
• C)81 cents
• D)70 cents

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Definitions:

General Costs

Broadly, expenses that are not directly tied to a specific product or service, often including overhead costs.

Period Costs

Expenses that are not directly tied to production activities, typically including selling, general, and administrative expenses.

Income Statement

An Income Statement is a financial document that shows a company's revenues and expenses over a specific period, highlighting its profit or loss.

Expenses

The costs incurred in the process of earning revenue, categorized as operating or non-operating depending on their nature.