Suppose a Firm Uses Workers and Office Space to Produce

question 73

Multiple Choice

Suppose a firm uses workers and office space to produce output. The firm is locked into a year-long lease on its office space, but it can easily vary the number of employee-hours it uses each day. The table below describes the relationship between the number of employee-hours the firm uses each day and the firm's daily output. Each unit of output sells for $2, the hourly wage rate is $14, and the rent on the office space is $50 per day. $$\begin{array} { | c | c | } \hline \begin{array} { c } \text { Employee-Hours } \\\text { Per Day }\end{array} & \begin{array} { c } \text { Output } \\\text { Per Day }\end{array} \\\hline 0 & 0 \\\hline 1 & 40 \\\hline 4 & 80 \\\hline 9 & 120 \\\hline 15 & 160 \\\hline 23 & 200 \\\hline\end{array}$$ What is the marginal cost of production between 80 and 120 units of output each day?

• A)$1.40
• B)$1.75
• C)$14
• D)$70

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Definitions:

Exchange Rates

The monetary value of one currency in relation to another.

Forward Trade

A financial contract agreement to buy or sell an asset at a future date at a predetermined price.

Currency Exchange

The process of converting one currency into another currency.

Spot Exchange Rate

The current price at which one currency can be exchanged for another for immediate delivery.