Question

Output, q	Total Cost, $
0	15
1	25
2	33
3	40
4	48
5	58
6	70

A. Please refer to the cost table above. What is the total fixed cost of producing two units of output?

B. Please refer to the cost table above. What is the average total cost of producing four units of output?  

C. Please refer to the cost table above. What is the marginal cost of producing the fourth unit of output?

D. Please refer to the cost table above. Assume that the enterprise uses only labor and capital to produce output
     and that capital is the fixed input that generates total fixed costs. Labor is accountable for all variable costs.
    If the enterprise employed three units of labor to produce four units of output, what would be the wage rate
    per unit of labor? (Hint: at first this may seem like there is not enough information, but remember how to
    break total cost down into fixed and variable components.)

Answer 1

A.

Fixed cost of producing two units of output is $15.

Because when the output was 0 Total cost was $15, this is because at initial stage there was no production, therefore no variable cost in Total cost. And the Fixed cost is the cost which remains fixed over a time. Doesn't matter how much the output it will remain fixed.

B.

Average total cost(ATC) of producing four units of output = Total cost at unit 4/ 4 units.

Ie. =〉 $48/4

=〉 $12

Therefore, ATC of producing 4 units of output is $12

C.

Marginal cost(MC) of producing the fourth unit of output = Change Cost/ Change in unit produced.

Ie. =〉 $48 - $40/ 4 - 3

=〉 $8/1

=〉 $8

​​​MC of producing the 4th unit of output is $8.

D.

As there is only labour is accountable for all variable costs(VC), and therefore variable cost equals to marginal cost.

So, wage rate per unit of labour at output 4 units = Marginal Cost(ie.VC) at 4 units/ 3 Units of labour(as given int the Question).

Ie.=〉 $8/3

=〉 $2.67 per unit of labour

Hence Wage rate per unit of labour = $2.67.