Costs in the Short Run

Read this section about how to calculate costs in the short-run like variable and marginal costs. Make sure to answer the "Try It" questions.

LEARNING OBJECTIVES

Answer to Try It Question

  • $135
    Correct. 3 workers are required to produce 45 units/hour and each gets paid at $15 so labor cost if 3 * $15 = $45. The cost of material is $2 per unit so 45 * $2 = $90 is the cost of material. Total cost for 45 units = $45 + $90 - $135

    • Number of Workers Production (units/hr) Cost per worker per hour Total labor cost Cost of Materials Total Cost
    1 10 $15 $15 20 35
    2 30 $15 $30 60 90
    3 45 $15 $45 90 135
    4 55 $15 $60 110 170
    5 60 $15 $75 120 195

  • $105
    Incorrect. 3 workers are required to produce 45 units/hour and each gets paid at $15 so labor cost is 3 * $15 = $45. The cost of material is $2 per unit so $45 * $2 = $90 is the cost of material. Total cost for 45 units = $45 + $90 - $135.

  • $47
    Incorrect. Don't forget the cost of material for 45 units. The cost of material is $2 per unit so $45 * 2 = $90 is the cost of material. 3 workers are required to produce 45 units/hour and each gets paid at $15 so labor cost if 3 * $15 = $45. Total cost for $45 units = $45 + $90 - $135.