Question

The following table shows a part of the daily labor-output relationship for a firm. In this table q is the quantity of output produced and L the amount of labor required to produce the corresponding level of output. For example, to produce 2 units of output per day we need a total of 50 units of labor and to produce 5 units per day we need a total of 120 units of labor. The wage rate is $40 per day per worker and the fixed cost of production is $3,200. By the way, such a relationship between inputs and outputs is called a production function.

q	l
0	0
1	30
2	50
3	60
4	80
5	120
6	190

The total cost of producing four units of output per day is _______ dollars. Note: Enter the number without a dollar sign, commas, or decimal places.

Answer 1

The total cost of producing four units of output per day is = Total variable cost + Total fixed cost

Here, variable cost is the cost of 80 workers for a day. Wage rate is $40 per worker for a day. So, for 80 workers, total wage will be 80 * $40 = $3,200.

Total fixed cost is $3200.

So, the total cost of producing four units of output per day is = Total variable cost + Total fixed cost = $3,200 + $3,200 = $6,400.