Question

Consider that the short-run production function for meat-packaging firm is q=20.5. If the marginal cost of producing the 10th unit is S5, then one can conclude that the wage per unit of laboris $0.05. O $0.25 cannot be determined without additional information $1.00

Answer 1

The production function for the given firm shows that Labour (L) is the only input for the firm. Thus the total cost of the firm will be:

$TC = Wage\times Labour$

From the production function, we see:

9 La
Or

Replacing for labour in the Total Cost equation, we get:

Differentiating it with respect to q to get MC,

$MC=2wq$

Now, as given in the question, MC of producing 10th unit is $5, the wage will be:

$w=\frac{MC}{2q}$

$w=\frac{5}{2\times10} = \boldsymbol{0.25}$

Hence, (b) $0.25 is the answer.

Thanks!