The following data show the total output for a firm when different amounts of labour are combined with a fixed amount of capital.Assume that the wage per unit of labour is $10 and the cost of the capital is $50.
TABLE 7-3
-Refer to Table 7-3.The average total cost when producing 150 units of output is approximately
A)33 cents.
B)40 cents.
C)67 cents.
D)80 cents.
E)$1.50.

Question

The following data show the total output for a firm when different amounts of labour are combined with a fixed amount of capital.Assume that the wage per unit of labour is $10 and the cost of the capital is $50.
  TABLE 7-3
-Refer to Table 7-3.The average total cost when producing 150 units of output is approximately
A)33 cents. 
B)40 cents. 
C)67 cents. 
D)80 cents. 
E)$1.50.

Quizplus · Accepted Answer

To calculate the average total cost, we need to divide the total cost (which includes both fixed and variable costs) by the total output. From the table, we can see that the total cost of producing 150 units of output with 14 units of labor is $100. This includes $50 for the fixed cost of capital, and $50 for the variable cost of labor (14 units of labor at $10 per unit). Therefore, the average total cost is $100/150 = 0.67 or 67 cents.

The Following Data Show the Total Output for a Firm