To produce a unit of output, Alphaworks uses 10 hours of labour and 5 kilograms of material. Betaworks uses 5 hours of labour and 10 kilograms of material, and Gammaworks uses 10 hours of labour and 10 kilograms of material. If labour costs $10 per hour and material costs $5 per kilogram, which firm is economically efficient?
A)Alphaworks only
B)Betaworks only
C)Gammaworks only
D)Alphaworks and Betaworks
E)Alphaworks and Gammaworks

Question

Quizplus · Accepted Answer

Betaworks is economically efficient because it has the lowest total cost per unit of output. Betaworks uses 5 hours of labor ($50) and 10 kilograms of material ($50), totaling $100. Alphaworks and Gammaworks both have higher total costs.

To Produce a Unit of Output, Alphaworks Uses 10 Hours