Question

An economy is employing 2 units of capital, 5 units of raw materials, and 8 units of labor to produce its total output of 640 units. Each unit of capital costs $10; each unit of raw materials, $4; and each unit of labor, $3. The per-unit cost of production in this economy is _____.

a. $0.10.
b. $0.50.
c. $1.00.
d. $0.05.

Answer 1

Answer: $0.1

Explanation:

Per unit cost of production = Total cost of factors of production / total quantity

Total cost of Labour = $3 × 8 = $24

Total cost of capital = $10 × 2 = $20

Total cost of raw materials = $4 × 5 = $20

Total cost of factors of production = $24 +$20 + $20 = $64

$64 / 640 = $0.1