Suppose that each worker must use only one shovel to dig a trench,and shovels are useless by themselves.In the long run,the firm's cost function is
A) TC = (w/r) ∗ q.
B) TC = (w + r)/q.
C) TC = (w + r).
D) TC = (w + r) ∗ q.

Question

Quizplus · Accepted Answer

In the long run, both labor (w for wages) and capital (r for rental rate of shovels) are variable costs. The total cost (TC) would increase linearly with the quantity of trenches dug (q) because each worker (and thus each shovel) adds a constant amount to the total cost. Therefore, TC = (w + r) * q, where (w + r) is the combined cost of labor and capital per unit of output.

Suppose That Each Worker Must Use Only One Shovel to Dig