Suppose that the firm's only variable input is labor.When 50 workers are used,the average product of labor is 50 and the marginal product of labor is 75.The wage rate is $80 and the total cost of the fixed input is $500.What is the marginal cost?
A)$0.63
B)$0.94
C)$1.60
D)$3.20
E)none of the above

Question

Quizplus · Accepted Answer

The marginal cost (MC) is calculated as the change in total cost (TC) divided by the change in quantity (Q). Since the marginal product of labor (MPL) is 75, this means that one additional worker produces 75 additional units of output. The cost of hiring one more worker is the wage rate, which is $80. Therefore, the marginal cost is $80 divided by 75, which equals $1.07. Since this option is not listed, the correct answer is E) none of the above.

Suppose That the Firm's Only Variable Input Is Labor