Suppose that a firm has only one variable input,labor,and firm output is zero when labor is zero.When the firm hires 6 workers the firm produces 90 units of output.Fixed costs of production are $6 and the variable cost per unit of labor is 10 dollars.The marginal product of the seventh unit of labor is 4.Given this information,what is the marginal cost of production when the firm hires the 7th worker?

Question

Quizplus · Accepted Answer

To calculate the marginal cost of production, we need to calculate the change in total cost when we increase the quantity of labor by one unit. 
Total cost with 6 workers = fixed cost + (variable cost per unit of labor * quantity of labor) 
= 6 + (10 * 6) 
= $66 
Total cost with 7 workers = fixed cost + (variable cost per unit of labor * quantity of labor) 
= 6 + (10 * 7) 
= $76 
Therefore, the change in total cost = $76 - $ 66 = $10 
The change in output when going from 6 to 7 workers is the marginal product of the 7th worker, which is given as 4. 
Marginal cost of production = change in total cost / marginal product of labor 
= $10 / 4 
= $2.50 
Therefore, the answer is B.

Suppose That a Firm Has Only One Variable Input,labor,and Firm