In the following graph,the price of capital is $100 per unit; the price of labor is $25 per unit.How much does the seventh unit of output add to total cost?
A)nothing
B)$400
C)$800
D)$4,000
E)$8,000

Question

In the following graph,the price of capital is $100 per unit; the price of labor is $25 per unit.How much does the seventh unit of output add to total cost? 
A)nothing 
B)$400 
C)$800 
D)$4,000 
E)$8,000

Quizplus · Accepted Answer

According to the graph, the marginal cost of the seventh unit of output is $100. Therefore, the seventh unit of output adds $100 to the total cost, which includes both capital and labor. Since labor is priced at $25 per unit, and the production of the seventh unit requires one unit of labor, the seventh unit of output adds an additional $25 to the total cost. Therefore, the total additional cost for the seventh unit of output is $100 + $25 = $125.

In the Following Graph,the Price of Capital Is $100 Per