Refer to the following:
The capital stock is fixed at 50 units, the price of capital is $30 per unit, and the price of labor is $25 per unit.

$$\begin{array} { c c }
&\text { Average } \
\text { Output } & \text { Variable Cost }\
\hline 10 & \$ 40 \
20 & 30 \
30 & 45 \
40 & 60 \
\hline
\end{array}$$
-If the firm produces 30 units of output, how many units of labor does the firm use?
A) 30
B) 45
C) 54
D) 60
E) none of the above

Question

Refer to the following:
The capital stock is fixed at 50 units, the price of capital is $30 per unit, and the price of labor is $25 per unit.

$$\begin{array} { c c } 
&\text { Average } \
\text { Output } & \text { Variable Cost }\
\hline 10 & \$ 40 \
20 & 30 \
30 & 45 \
40 & 60 \
\hline
\end{array}$$
-If the firm produces 30 units of output, how many units of labor does the firm use?
A) 30
B) 45
C) 54
D) 60
E) none of the above

Quizplus · Accepted Answer

The average variable cost (AVC) at 30 units of output is $45. Since the price of labor is $25 per unit, the total variable cost (TVC) is $45 * 30 = $1350. Dividing the TVC by the price of labor gives the number of labor units: $1350 / $25 = 54 units.

Refer to the Following: the Capital Stock Is Fixed at 50

Refer to the Following:
the Capital Stock Is Fixed at 50