Answer the question on the basis of the following information about the relationship between input quantities and real domestic output in a hypothetical economy: $\begin{array} { c c }
\text { Input Quantity } & \text { Real Domestic Output } \
100 & 200 \
150 & 300 \
200 & 400
\end{array}$ Refer to the table.If the price of each input is $5,the per-unit cost of production in the economy is:
A) $5.
B) $2.75.
C) $2.50.
D) $.40.

Question

Answer the question on the basis of the following information about the relationship between input quantities and real domestic output in a hypothetical economy: $\begin{array} { c c } 
\text { Input Quantity } & \text { Real Domestic Output } \
100 & 200 \
150 & 300 \
200 & 400
\end{array}$ Refer to the table.If the price of each input is $5,the per-unit cost of production in the economy is:
A) $5.
B) $2.75.
C) $2.50.
D) $.40.

Quizplus · Accepted Answer

To calculate the per-unit cost of production, we need to add up the cost of all the inputs (in this case, labor and capital) used to produce one unit of output. From the given table, we can see that producing one unit of output requires 3 units of labor and 2 units of capital, which cost $15 ($5 per unit of labor or capital * 3 units of labor + $5 per unit of labor or capital * 2 units of capital). Therefore, the per-unit cost of production is $15 divided by one unit of output, which comes out to be $2.50.