Suppose That a Firm Has Only One Variable Input, Labor

question 109

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 variable cost of production when the firm hires 7 workers?

• A)$12.67
• B)$11
• C)81 cents
• D)75 cents

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Definitions:

Periodic Inventory System

An inventory system where updates to inventory levels are made on a periodic basis rather than continuously.

Cost of Goods Sold

Cost of Goods Sold (COGS) refers to the direct costs attributable to the production of the goods sold by a company, including materials and labor.

Purchases

The total amount of goods and materials acquired by a business for the purpose of resale or production during a specific accounting period.

Cost of Goods Sold

The costs directly linked to producing a company’s sold goods, encompassing labor and materials.