Austin's total fixed cost at the bakery is $3,600 a month.Austin employs 20 workers and pays each worker $8 an hour.The marginal product of the twentieth worker is 12 iced cupcakes an hour.What is the marginal cost of the last cupcake produced by the last worker Austin hired?
A)$0.26
B)$0.66
C)$3.81
D)$8.00

Question

Quizplus · Accepted Answer

To find the marginal cost of the last cupcake produced by the last worker, we need to use the formula:

Marginal Cost = Change in Total Cost / Change in Quantity

We know that the marginal product of the last worker is 12 cupcakes per hour, so the change in quantity is 12. We also know that each worker is paid $8 per hour, so the additional cost of hiring the last worker is $8.

To find the change in total cost, we need to know how much of the 20 workers are currently being used. If all 20 workers are being fully utilized, then hiring the last worker will result in a total cost increase of $8 because the fixed cost remains the same. However, if not all workers are being fully utilized, then hiring the last worker will increase the total output and reduce the average cost per unit of output. In this case, we are not given information about the level of utilization, so we assume that all workers are being fully utilized.

Therefore, the marginal cost of the last cupcake produced by the last worker is:

Marginal Cost = $8 / 12 cupcakes
Marginal Cost = $0.66

So the best choice is B, $0.66.

Austin's Total Fixed Cost at the Bakery Is $3,600 a Month.Austin