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?

Question

Karina Potts

Business

4 April, 22:00

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?

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Answers (1)

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Jaydan · Answer 1

20

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.