The following data show the total output for a firm when specified amounts of labour are combined with a fixed amount of capital.When answering the questions,you are to assume that the wage per unit of labour is $25 and the cost of the capital is $100. $$\begin{array} { | c | c | }
\hline \text { Labour per unit of time } & \text { Total output } \
\hline 0 & 0 \
\hline 1 & 25 \
\hline 2 & 75 \
\hline 3 & 175 \
\hline 4 & 250 \
\hline 5 & 305 \
\hline
\end{array}$$ TABLE 7- 4
-Refer to Table 7- 4.The average total cost of producing 75 units of output is
A)$0.80.
B)$1.
C)$2.
D)$1.33.
E)$0.67.

Question

The following data show the total output for a firm when specified amounts of labour are combined with a fixed amount of capital.When answering the questions,you are to assume that the wage per unit of labour is $25 and the cost of the capital is $100. $$\begin{array} { | c | c | } 
\hline \text { Labour per unit of time } & \text { Total output } \
\hline 0 & 0 \
\hline 1 & 25 \
\hline 2 & 75 \
\hline 3 & 175 \
\hline 4 & 250 \
\hline 5 & 305 \
\hline
\end{array}$$ TABLE 7- 4
-Refer to Table 7- 4.The average total cost of producing 75 units of output is
A)$0.80.
B)$1.
C)$2.
D)$1.33.
E)$0.67.

Quizplus · Accepted Answer

The average total cost is calculated by dividing the total cost by the total output. For 75 units, the total cost is the cost of 2 units of labor ($25 each) plus the fixed capital cost ($100), which equals $150. Dividing $150 by 75 units gives an average total cost of $2 per unit.

The Following Data Show the Total Output for a Firm