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12 October, 23:41

Suppose that for a particular firm the only variable input into the production process is labor and that outputequals zero when no workers are hired. in addition, suppose that the average total cost when 5 units of outputare produced is $30, and the marginal cost of the sixth unit of output is $60. what is the average total cost when six units are produced?

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  1. 13 October, 01:52
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    This is the concept of financial arithmetic. To get the average cost when six units we shall proceed as follows;

    Total cost of producing 5 units will be:

    (average cost) * (number of units)

    =5*30

    =$150

    Given that the marginal cost of producing the sixth unit is $60, then the total cost of producing six units will be:

    150+60

    =$210
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