The only variable input used in producing bicycles in a small factory is labor. Currently four workers are employed; each works 40 hours per week and is paid $10 per hour. If fixed cost is $2,000 per week and total output is 10 bicycles per week, average cost is:
A) $160.
B) $260.
C) $200.
D) $360.

Question

Quizplus · Accepted Answer

The total labor cost is 4 workers * 40 hours/week * $10/hour = $1,600. Adding the fixed cost of $2,000, the total cost is $3,600. The average cost per bicycle is $3,600 / 10 bicycles = $360.

The Only Variable Input Used in Producing Bicycles in a Small