A factory producing motorcycle helmets employs six workers. At the current production level, each worker produces 20 helmets per week. Assuming that labour is the only variable input and that the weekly wage equals $600 per week, what is the average variable cost per helmet?

Question

Quizplus · Accepted Answer

The total variable cost is the product of the weekly wage and number of workers (since the number of helmets produced per worker is fixed). 
Total variable cost = $600 × 6 = $3600/week 
The average variable cost is the total variable cost divided by the total number of helmets produced. 
Total number of helmets produced = 20 helmets/worker × 6 workers = 120 helmets/week 
Average variable cost = Total variable cost/Total number of helmets produced = $3600/120 helmets = $30/helmet. 
Therefore, the correct choice is B ($30).

A Factory Producing Motorcycle Helmets Employs Six Workers