Following is a firm's expansion path.The price of capital is $5 per unit; the price of labor is $2 per unit. $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $$\text { Ontimal Input Choice }$
$\begin{array}{c}
\begin{array}{c}
\text {Units of Output}\
10\
20\
30
\end{array}
\begin{array}{c}
\text {Units of Capital}\
6\
8\
13
\end{array}
\begin{array}{c}
\text {Units of Labor}\
5\
10\
20
\end{array}
\end{array}$

When output is 20 units,what is long-run average cost?
A)$2
B)$3.50
C)$4
D)$4.50
E)none of the above

Question

Following is a firm's expansion path.The price of capital is $5 per unit; the price of labor is $2 per unit.  $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $$\text { Ontimal Input Choice }$
$\begin{array}{c}
\begin{array}{c}
\text {Units of Output}\
10\
20\
30
\end{array}
\begin{array}{c}
\text {Units of Capital}\
6\
8\
13
\end{array}
\begin{array}{c}
\text {Units of Labor}\
5\
10\
20
\end{array}
\end{array}$

When output is 20 units,what is long-run average cost?
A)$2
B)$3.50
C)$4
D)$4.50
E)none of the above

Quizplus · Accepted Answer

To find the long-run average cost when output is 20 units, we first calculate the total cost of producing 20 units of output. The total cost includes the cost of capital and the cost of labor. Given the price of capital is $5 per unit and the price of labor is $2 per unit, for 20 units of output, the firm uses 8 units of capital and 10 units of labor. Thus, the total cost is (8 units of capital * $5 per unit) + (10 units of labor * $2 per unit) = $40 + $20 = $60. The long-run average cost is the total cost divided by the quantity of output, which is $60 / 20 units = $3. Therefore, the correct answer is not listed among the provided options.

Following Is a Firm's Expansion Path \quad \quad \quad

Following Is a Firm's Expansion Path $\quad$ $\quad$ $\quad$