Question

suppose that a firm has only one variable input, labor, and firm output is zero when labor is zero. when the firm hires 6 workers it produces 90 units of output. fixed cost of production are $6 and the variable cost per unit of labor is $10. the marginal product of the seventh unit of labor is 4. given this information, what is the total cost of production when the firm hires 7 workers? group of answer choices $76 $66 $946 $906

Answer 1

The total cost of production when the firm hires 7 workers is $76, which includes both the fixed cost of $6 and the variable costs for 7 workers at $10 each.

Step-by-step explanation:

To calculate the total cost of production when the firm hires 7 workers, we need to consider both fixed costs and variable costs. Based on the information provided, we know the fixed cost of production is $6 and the variable cost per unit of labor is $10. When 6 workers are hired, the firm produces 90 units, but we specifically need to calculate the cost for the 7th worker. The 7th worker adds a marginal product of 4 units.

The variable cost for 7 workers is 7 workers × $10 per worker = $70. Adding the fixed cost of $6, the total cost for 7 workers would be $70 (variable cost) + $6 (fixed cost) = $76.