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 }$
$\begin{array}{c}
\begin{array}{c}
\text {Units of Output}\
10\
20\
30
\end{array}
\begin{array}{c}
\text {Units of Capital}\
6\
8\
13
\end{array}
\begin{array}{c}
\text {Units of Labor}\
5\
10\
20
\end{array}
\end{array}$
How much does the 10th unit of output add to long-run total cost?
A)zero
B)$3
C)$4
D)$40
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 }$
$\begin{array}{c}
\begin{array}{c}
\text {Units of Output}\
10\
20\
30
\end{array}
\begin{array}{c}
\text {Units of Capital}\
6\
8\
13
\end{array}
\begin{array}{c}
\text {Units of Labor}\
5\
10\
20
\end{array}
\end{array}$
 How much does the 10th unit of output add to long-run total cost?
A)zero
B)$3
C)$4
D)$40
E)none of the above

Quizplus · Accepted Answer

The 10th unit of output requires 6 units of capital and 5 units of labor. The cost is $6 \times 5 + 5 \times 2 = 30 + 10 = 40$. However, since the question asks for the additional cost of the 10th unit, we consider the marginal cost. The cost for 20 units is $60 (8 units of capital and 10 units of labor), so the cost for 10 units is $40. The marginal cost of the 10th unit is $4.

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

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