A firm currently produces 3,500 units of output per week. After an additional worker is hired, output rises to 3,750 units per week. If the weekly wage paid to a worker is $500, what is the firm's short-run marginal cost? A. $500 B. $250 C. $2 D. None of the above is correct.

Question

Declan Wade

Business

28 March, 04:30

A firm currently produces 3,500 units of output per week. After an additional worker is hired, output rises to 3,750 units per week. If the weekly wage paid to a worker is $500, what is the firm's short-run marginal cost? A. $500 B. $250 C. $2 D. None of the above is correct.

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Yazmin Faulkner · Answer 1

C. $2

Explanation:

The marginal cost is the cost for producing an additional unit of the product. According to this and as the statement says that with the additional worker the output rises to 3,750, teh first thing is to find the number of additional units that were produced:

3,750-3500 = 250

With the new worker, the firm produces an additional 250 units that cost $500 because this is the salary of the new worker and to calculate the cost of one additional unit you have to do the following:

250 units ⇒ $500

1 unit ⇒ x

x = (1*500) / 250 = 2

The firm's short-run marginal cost is $2.