Suppose That for a Particular Firm the Only Variable Input

question 7

Multiple Choice

Suppose that for a particular firm the only variable input into the production process is labor and that output equals zero when no workers are hired. In addition, suppose that when the firm hires 4 workers, the firm produces 50 units of output. If the fixed cost of production is $4, the variable cost per unit of labor is $20, and the marginal product of labor for the fifth unit of labor is 2, what is the average total cost of production when the firm hires 5 workers?

• A)$2.00
• B)$20.00
• C)$20.80
• D)$22.80

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Definitions:

Operating Budgets

Financial plans that outline projected income and expenses for a business over a specific period, typically one year, guiding daily decision-making.

Sales Budget

A financial plan that estimates future sales revenue within a specific period.

Production Cost

The total cost incurred by a company to manufacture a product, including labor, materials, and overhead expenses.

Budgeted Balance Sheet

A financial report that projects a company's financial position at a future date, estimating assets, liabilities, and owner's equity.