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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 20perunit.Thecostofthesixthunitis20 per unit. The cost of the sixth unit is26.What is the average cost of six units?

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Solution

To calculate the average cost of six units, you need to follow these steps:

  1. First, calculate the total cost of the first five units. Since each unit costs 20,youmultiply5units20, you multiply 5 units * 20/unit = $100.

  2. Then, add the cost of the sixth unit, which is 26.So,26. So, 100 + 26=26 = 126.

  3. Finally, divide the total cost by the number of units to get the average cost. So, 126/6units=126 / 6 units = 21/unit.

Therefore, the average cost of six units is $21 per unit.

This problem has been solved

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