Question

Suppose that for a particular firm the only variable input into the production process is labor and that outputequals zero when no workers are hired. in addition, suppose that the average total cost when 5 units of outputare produced is $30, and the marginal cost of the sixth unit of output is $60. what is the average total cost when six units are produced?

Answer 1

This is the concept of financial arithmetic. To get the average cost when six units we shall proceed as follows;
Total cost of producing 5 units will be:
(average cost)*(number of units)
=5*30
=$150
Given that the marginal cost of producing the sixth unit is $60, then the total cost of producing six units will be:
150+60
=$210