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.Suppose that installation of a new assembly line increases the output produced per worker.The cost per unit of output
A)will increase.
B)will decrease.
C)will be unchanged.
D)is at its maximum.
E)is at its minimum

Question

Quizplus · Accepted Answer

Since the installation of a new assembly line increases the output produced per worker, the marginal product of labor will increase. This will lead to a lower cost per unit of output, as the same fixed cost is spread over more output. Therefore, the cost per unit of output will decrease.

Suppose That the Firm's Only Variable Input Is Labor