Question

Austin's total fixed cost is $4,000. Austin employs 15 workers and pays each worker $100. The average product of labor is 5, and the marginal product of the last worker hired is 8. What is the marginal cost of the last unit produced by the last worker Austin hired?

Answer 1

The marginal cost of the last unit produced by the last worker Austin hired is $12.50, calculated by dividing the wage paid to the worker ($100) by the marginal product of labor (8 units).

Step-by-step explanation:

To calculate the marginal cost of the last unit produced by the last worker hired by Austin, we need to consider the cost of hiring the worker and the additional output that worker provides. Austin pays $100 per worker and the last worker has a marginal product of 8 units.

The marginal cost (MC) is the increase in total cost divided by the increase in output (the marginal product of labor), which is:

MC = Wage / Marginal Product of Labor

MC = $100 / 8

MC = $12.50 per unit

This is the marginal cost of the last unit produced by the last worker Austin hired. It's important to note that this cost is representative of the additional output from the last worker only, not the overall average cost of production.