Consider a firm with only one variable input, labor. firm output is zero when labor is zero. when the firm hires 6 workers the firm produces 90 units of output. fixed costs of production are $6 and the variable cost per unit of labor is $10. the marginal product of the seventh unit of labor is 4. given this information, what is the average variable cost of production when the firm hires 7 workers?

The average variable cost of production when the firm hires 7 workers is 81.77 cents

Explanation:

For 6 workers,

The fixed cost is = $6

And, the variable cost is = Variable cost per unit × number of workers

                                        = $10 × 6

                                        = $60

For 7 workers,

The fixed cost is = $6

And, the variable cost is = Variable cost per unit × number of workers

                                        = $10 × 7

                                        = $70

The average variable cost equals to

= (Variable cost ÷ number of units) + marginal product of the seventh unit of labor

= $70 ÷ 90 units + 4

= 77.77 + 4

= 81.77 cents

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