Question

Question 10 (4 points) The following table shows the total output, number of workers employed, variable costs, and fixed costs of a firm Number of Workers 0 1 2 3 Total Output (units) 0 25 Variable Costs () 0 10 Fixed Costs (5) 150 150 150 SS 86 110 150 5 130 6 145 7 155 160 Suppose the only variable input that the firm uses is labor. What is the wage paid to a worker in the firm? O $15 $10 Os1 $5

Answer 1

Answer 10.) Second option $10

Given, as the only variable input the firm uses is labour then from 1st and 3rd column it can be analyzed that -

Here Total cost = Total Variable cost + Total Fixed cost

or, C = 150+ w.L ( w= wage rate and L is no. of workers)

or Total variable costs = w.L

or, w= C/L

Here when no. of workers = 1, variable cost is $10, when workers = 2, variable cost = $20 and so on.It means that as number of workers increase by 1 unit, variable cost increases by $10. Therefore wages paid per worker is $10.