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An economy is employing 2 units of capital, 5 units of raw materials, and 8 units of labor to produce its total output of 640 units. Each unit of capital costs $10; each unit of raw materials, $4; and each unit of labor, $3. The per-unit cost of production in this economy is Multiple Choice $0.05. $1.00. $0.10. $0.50.

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abiolataiwo2015

The per-unit cost of production in this economy is $0.10.

Per-unit cost of production

First step is to find the total cost

Capital=2×$10

Capital=$20

Raw materials=5×$4

Raw material=$20

Labor=8×$3=$24

Labor

Total cost=$20+$20+$24

Total cost=$64

Second step is to calculate the per-unit cost of production

Cost per unit of production=$64/640

Cost per unit of production=$0.10

Inconclusion the per-unit cost of production in this economy is $0.10.

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