Refer to the following:

Suppose a firm is hiring 20 workers at a wage rate of $60. The average product of labor is 30, the last worker added 12 units of output, and total fixed cost is $3,600.

-What is marginal cost?
A) $.20
B) $5
C) $240
D) $720
E) none of the above

Question

Refer to the following:

Suppose a firm is hiring 20 workers at a wage rate of $60.  The average product of labor is 30, the last worker added 12 units of output, and total fixed cost is $3,600.

-What is marginal cost?
A) $.20
B) $5
C) $240
D) $720
E) none of the above

Quizplus · Accepted Answer

Marginal cost is calculated as the change in total cost divided by the change in output. The change in total cost is the wage of the last worker, $60, and the change in output is the marginal product of the last worker, 12 units. Thus, marginal cost = $60 / 12 = $5.

Refer to the Following