Refer to the following graph.The price of labor is $3 per unit: How many units of labor should a firm use in order to produce 100 units of output at the least cost?
A)5 units of labor
B)10 units of labor
C)15 units of labor
D)20 units of labor

Question

Refer to the following graph.The price of labor is $3 per unit:  How many units of labor should a firm use in order to produce 100 units of output at the least cost?
A)5 units of labor 
B)10 units of labor 
C)15 units of labor 
D)20 units of labor

Quizplus · Accepted Answer

To produce 100 units of output at the least cost, the firm should look for the point on the graph where the total cost (TC) curve is at its lowest level. As can be seen from the graph, the point where the TC curve is at its lowest level lies at the intersection of the total variable cost (TVC) curve and the 100 units of output line. This point corresponds to a level of labor input of 10 units (which is where the TVC curve intersects the vertical line of 100 units of output), which is the least cost combination of labor and output. Therefore, the firm should use 10 units of labor to produce 100 units of output at the least cost.

Refer to the Following Graph