An economy is employing 2 units of capital, 5 units of raw materials, and 8 units

An economy is employing 2 units of capital, 5 units of raw materials, and 8 units of labour to produce its total output of 640 u nits. Each unit of capital costs $10, each unit of raw materials, $4, and each unit of labour, $3.The per unit cost of production in this economy is:_______

A) $1.00.

B) $.10.

C) $.05.

D) $.50.

Expert Solution

Explanation: All the cost used in the production process is called production cost.

Capital cost = Units x Cost per unit = 2 x $10 = $20

Raw Material cost = Units x Cost per unit = 5 x $4 = $20

Labor cost = Units x Cost per unit = 8 x $3 = $24

Total Cost = Capital cost + Raw Material cost + Labor cost Total Cost = $20 + $20 + $24 = $64

Cost per unit = Total cost / Number of units = $64 / 640 = $0.10

B) $.10.

Junaid answered 2 years ago

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