Refer to Table 8.4. Assume that the relevant time period is the short run. Assuming the price of labor (L) is $5 per unit and the price of capital (K) is $10 per unit, the average total cost of producing two units of output is

A) $10.
B) $20.
C) $45.
D) $50.

Question

Melissa Shoesmith · Accepted Answer

Final Answer : C, Explanation :  To calculate the average total cost (ATC) of producing two units of output, we first need to determine the total cost (TC) of production for each technique (A and B), and then divide by the quantity of output produced (which is 2 units in this case). The total cost of production is calculated by adding the cost of labor (L) and the cost of capital (K). Given that the price of labor (L) is $5 per unit and the price of capital (K) is $10 per unit, we calculate as follows:For Technique A:- Units of Variable K for 2 units of output = 7, so the cost of K = 7 * $10 = $70.- Inputs L for 2 units of output = 6, so the cost of L = 6 * $5 = $30.- Total cost (TC) for Technique A = $70 + $30 = $100.For Technique B:- Units of Variable K for 2 units of output = 4, so the cost of K = 4 * $10 = $40.- Inputs L for 2 units of output = 10, so the cost of L = 10 * $5 = $50.- Total cost (TC) for Technique B = $40 + $50 = $90.Since we are looking for the average total cost (ATC) for producing 2 units of output, and Technique B offers the lower total cost, we use the total cost from Technique B for our calculation:- ATC = Total Cost / Quantity of Output = $90 / 2 = $45.Therefore, the average total cost of producing two units of output is $45.

Refer to Table 8.4. Assume that the relevant time period is the short run. Assuming the price of labor (L) is $5 per unit and the price of capital (K) is $10 per unit, the average total cost of producing two units of output is

A) $10.
B) $20.
C) $45.
D) $50.

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Learning Objectives

Related questions

Refer to Table 8.4. Assume that the relevant time period is the short run. Assuming the price of labor (L) is $5 per unit and the price of capital (K) is $10 per unit, the average total cost of producing two units of output isA) $10.B) $20.C) $45.D) $50.

Definitions

Learning Objectives

Learning Objectives

Related questions

Refer to Table 8.4. Assume that the relevant time period is the short run. Assuming the price of labor (L) is $5 per unit and the price of capital (K) is $10 per unit, the average total cost of producing two units of output is

A) $10.
B) $20.
C) $45.
D) $50.