Question

Suppose that a​ firm's only variable input is​ labor, and the constant hourly wage rate is ​$20 per hour. The last unit​ (hour) of labor hired enabled the firm to increase its hourly production from 250 units to 251 units. What was the marginal cost of the 251st unit of​ output?

Answer 1

20

Step-by-step explanation:

The marginal cost refers to the cost a company has when an additional unit is manufactured and it is calculated using the formula:

Marginal Cost= change in costs / change in quantity

Change in cost in this case is 20 as the last unit of labor hired costs an additional 20 per hour.

Change is quantity is 1 as the hourly production increases from 250 to 251 units.

Marginal Cost=20/1

Marginal Cost= 20

The marginal cost of the 251st unit of​ output was 20.