Suppose that for a particular firm the only variable input into the production process is labor and that output equals zero when no workers are hired. In addition, suppose that the average total cost when 5 units of output are produced is $30, and the marginal cost of the sixth unit of output is $60. What is the average total cost when six units are produced?
A)$10
B)$25
C)$30
D)$35

Question

Quizplus · Accepted Answer

The total cost for 5 units is 5 * $30 = $150. Adding the marginal cost of the sixth unit ($60) gives a total cost of $210 for 6 units. The average total cost for 6 units is $210 / 6 = $35.

Suppose That for a Particular Firm the Only Variable Input