Assume fixed costs are 470 and labor costs $20 per unit. The first laborer produces 20 units of output. Subsequent hires add 5 units less to production than the previous worker. Thus the second worker adds 15, the third adds 10 etc. What is the average variable cost of output when one worker is hired?

$1

Explanation:

Given

Fixed cost=$470

Variable cost(labor per unit)=$20

Labor 1=20 units

Labor 2=20+15=35 units

Labor 3=20+10=30 units

Average variable cost=variable cost/output

Therefore,

Average variable cost of output when one worker is hired

Average variable cost(AVC)=variable cost/output

AVC=$20/20 units

=$1

The average variable cost refers to the total variable cost per unit. It is calculated by dividing total variable costs by total output.

A change in the output causes a change in the variable cost.

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