Question

Per unit production cost is:

A) real output divided by inputs.
B) total input cost divided by units of output.
C) units of output divided by total input cost.
D) a determinant of aggregate demand.

Answer 1

The per unit production cost is calculated by dividing the total input cost by the number of units of output produced.

Step-by-step explanation:

The correct answer is B) total input cost divided by units of output. Per unit production cost, also known as average cost, is calculated by dividing the total input cost by the number of units of output produced. It represents the average cost of producing each unit of output.

For example, if a firm has a total input cost of $100 and produces 10 units of output, the per unit production cost would be $100/10 = $10. This means that, on average, it costs the firm $10 to produce each unit of output.

Therefore, the formula to calculate per unit production cost is: Average Cost (AC) = Total Input Cost (TC) / Units of Output (Q).