Question

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 when the firm hires 4 workers, the firm produces 50 units of output. If the fixed cost of production is $4, the variable cost per unit of labor is $20, and the marginal product of labor for the fifth unit of labor is 2, what is the marginal cost of production when the firm hires 5 workers

Answer 1

Answer:

$20

Explanation:

Marginal cost is the extra cost incurred in order to produce and additional unit of a product.

Marginal product is an additional unit obtained from an extra unit of input.

From the question;

Variable cost per unit of labor = Marginal cost of labor = $20

Marginal product of labor = $2

Therefore, the marginal cost of production when the firm hires 5 workers is variable cost per unit of labor which is $20.