The following graph shows the marginal and average product curves for labor,the firm's only variable input.The monthly wage for labor is $2,800.Fixed cost is $160,000. When the firm uses 120 units of labor,how much output does it produce?
A)7,000 units
B)70 units
C)8,400 units
D)9,200 units
E)7,500 units

Question

The following graph shows the marginal and average product curves for labor,the firm's only variable input.The monthly wage for labor is $2,800.Fixed cost is $160,000.  When the firm uses 120 units of labor,how much output does it produce?
A)7,000 units 
B)70 units 
C)8,400 units 
D)9,200 units 
E)7,500 units

Quizplus · Accepted Answer

From the graph, we can see that the point where MP intersects AP is at around 120 units of labor. At this point, AP is at its maximum and MP is equal to AP. Therefore, if the firm uses 120 units of labor, it will produce 8,400 units of output (which is the maximum output it can produce with the given technology and resources). Therefore, the correct answer is choice C.

The Following Graph Shows the Marginal and Average Product Curves