Refer to the following:
The following graph shows the marginal and average product curves for labor, the firm's only variable input. The monthly wage for labor is $2,800. Fixed cost is $160,000.

-When the firm uses 120 units of labor, what is average total cost at this output?
A) $59
B) $40
C) $190
D) $84
E) $120

Question

Refer to the following:
The following graph shows the marginal and average product curves for labor, the firm's only variable input. The monthly wage for labor is $2,800. Fixed cost is $160,000.
 
-When the firm uses 120 units of labor, what is average total cost at this output?
A) $59 
B) $40 
C) $190 
D) $84 
E) $120

Quizplus · Accepted Answer

Average total cost is total cost divided by output. At an output of 120 units, total cost is $7,080 (120 units * $59 per unit). Therefore, average total cost is $7,080 / 120 units = $59 per unit.

Refer to the Following