Question

(Table: Workers and Output) Use Table: Workers and Output. After graduation, you achieve your dream of opening an art shop that specializes in selling mud statues. You pay $10 per day on a loan from your uncle, regardless of how much you produce. You also pay $10 per day to each of the workers who you hire to make the mud statues. The total cost of producing 48 statues is:

Table: Workers and Output No. of Workers Output 10 1 25 2 3 35 43 4 5 48 40. (Table: Workers and Output) Use Table: Workers and Output. After graduation, you achieve your dream of opening an art shop that specializes in selling mud statues. You pay $10 per day on a loan from your uncle, regardless of how much you produce. You also pay $10 per day to each of the workers who you hire to make the mud statues. The variable cost of producing 48 statues is: A) $50 B) $48 C) $20 D) $10

Answer 1

Ans) Fixed cost is fixed and do not depend upon the level of production. It remains unchanged. Here fixed cost is $10. And will remain $10, no matter you produce 1,2,3,4 or 5 statute.

Variable cost depends upon the level of production and it changes with change in output. Here if you will employ 1 worker, variable cost will be $10, if you employ 2 workers then variable cost is $10× 2= $20 and so on.

Total cost = fixed cost + variable cost.

1) When you are producing 48 statute, you have employed 5 workers. So variable cost = 5× $10 = $50.

Option a.

2) Total cost of producing 48 statue = fixed cost + variable cost = $10 + $50 = $60.