Suppose that Billy Bud's Bucking Broncos employs 20 workers at a daily wage of $60 each.The average product of labour is 30 bucking broncos per day,the marginal product of the last worker is 12 bucking broncos per day,and total fixed cost is $3 600 for equipment.What is the marginal cost of the last bucking bronco produced?

Question

Quizplus · Accepted Answer

To find the marginal cost of the last bucking bronco, we need to use the formula:

Marginal Cost = Change in Total Cost / Change in Quantity

Since we know that total fixed cost is $3,600, we can find the total variable cost by subtracting this from the total cost. The total cost of producing 600 bucking broncos (20 workers x 30 broncos per worker) is:

Total Variable Cost = Total Cost - Total Fixed Cost
Total Variable Cost = (20 workers x $60 per worker) x 1 day
Total Variable Cost = $1,200

To find the marginal cost of the last bucking bronco, we can use the information on marginal product:

Marginal Cost = Change in Total Cost / Change in Quantity
Marginal Cost = ($1,260 - $1,200) / (31 - 30)
Marginal Cost = $60 / 1
Marginal Cost = $60

Therefore, the marginal cost of the last bucking bronco produced is $60, which is closest to option B ($5.00 per bucking bronco). Option C and D are much too high, while option A is too low.

Suppose That Billy Bud's Bucking Broncos Employs 20 Workers at a Daily