A firm produces five units of output at an average cost of $20 per unit. The cost of the sixth unit is$26.What is the average cost of six units?
Question
A firm produces five units of output at an average cost of 26.What is the average cost of six units?
Solution
To calculate the average cost of six units, you need to follow these steps:
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First, calculate the total cost of the first five units. Since each unit costs 20/unit = $100.
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Then, add the cost of the sixth unit, which is 100 + 126.
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Finally, divide the total cost by the number of units to get the average cost. So, 21/unit.
Therefore, the average cost of six units is $21 per unit.
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