Question

Assume fixed costs are 470 and labor costs $20 per unit. The first laborer produces 20 units of output. Subsequent hires add 5 units less to production than the previous worker. Thus the second worker adds 15, the third adds 10 etc. What is the average variable cost of output when one worker is hired?

Answer 1

$1

Step-by-step explanation:

Given

Fixed cost=$470

Variable cost(labor per unit)=$20

Labor 1=20 units

Labor 2=20+15=35 units

Labor 3=20+10=30 units

Average variable cost=variable cost/output

Therefore,

Average variable cost of output when one worker is hired

Average variable cost(AVC)=variable cost/output

AVC=$20/20 units

=$1

The average variable cost refers to the total variable cost per unit. It is calculated by dividing total variable costs by total output.

A change in the output causes a change in the variable cost.

Answer 2

$1 per unit

Step-by-step explanation:

fixed costs $470

labor costs $20 per worker

first worker

produces 20 units,

total cost $490 / 20 units = $24.50 per unit

variable cost = $20 / 20 units = $1 per unit

second worker

produces 15 units

total cost $510 / 35 units = $14.57 per unit

variable cost = $40 / 35 units = $1.14 per unit

third worker

produces 10 units

total cost $530 / 45 units = $11.78 per unit

variable cost = $60 / 45 units = $1.33 per unit

fourth worker

produces 5 units

total cost $550 / 50 units = $11 per unit

variable cost = $80 / 50 units = $1.60 per unit