Refer to the following:

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

Refer to the following:

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

Quizplus · Accepted Answer

With the installation of a new assembly line, the output produced per worker will increase, which means the cost per unit of output will decrease. This is because the fixed costs of the assembly line will be spread over a larger quantity of output, resulting in a lower cost per unit.

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