Question

Assume it takes 10 units of labor to produce 4 units of output. When the price of labor is $6 per unit and fixed costs equal $60, what is the total cost of those 4 units of output? Select one:

a. $120

b. $70

c. $84

d. $60

Answer 1

a) $120

Explanation:

Given:

It takes 10 units of labor to produce 4 units of output.

When the price of labor is $6 per unit and fixed costs equal $60.

Question asked:

What is the total cost of those 4 units of output?

Solution:

To produce 4 units of output:

Price of 1 labor = $6

Price of 10 labors = $6
`*` 10 = $60

Fixed cost = $60

Total cost = Price of labors to produce 4 units + Fixed cost

= $60 + $60 = $120

Therefore, the total cost of those 4 units of output is $120.