the price of labor is $100 per unit and the price of capital is $20 per unit. What will the long-run total cost and long-run average cost of producing 120 units?
To calculate the long-run total cost and long-run average cost of producing 120 units, we need to consider both labor and capital costs.
1. Calculate the labor cost:
The labor cost per unit is $100. To find the total labor cost, multiply the labor cost per unit by the number of units produced:
Labor cost = Labor cost per unit x Number of units
Labor cost = $100 x 120 units
2. Calculate the capital cost:
The capital cost per unit is $20. To find the total capital cost, multiply the capital cost per unit by the number of units produced:
Capital cost = Capital cost per unit x Number of units
Capital cost = $20 x 120 units
3. Calculate the long-run total cost:
The long-run total cost is the sum of the labor cost and capital cost:
Long-run total cost = Labor cost + Capital cost
4. Calculate the long-run average cost:
The long-run average cost is the long-run total cost divided by the number of units produced:
Long-run average cost = Long-run total cost / Number of units
Let's calculate the values:
Labor cost = $100 x 120 units = $12,000
Capital cost = $20 x 120 units = $2,400
Long-run total cost = $12,000 + $2,400 = $14,400
Long-run average cost = $14,400 / 120 units = $120 per unit
Therefore, the long-run total cost of producing 120 units is $14,400, and the long-run average cost is $120 per unit.