Consider the long-run production of shirts

Economics Dec 19, 2020

Consider the long-run production of shirts. The cost of the indivisible inputs used in the production of shirts is $400 per day. To produce 1 shirt per day, the firm must also spend a total of $5 on other inputs - labor, materials, and other capital. For each additional shirt, the firm incurs the same additional cost of $5.

The long-run average cost for: 100 shirts is $_.

Expert Solution

Average cost is $9 per shirt.

For producing 100 shirts, the total cost = fixed cost + total variable cost = 400 + 100*5 = $900. Average cost = total cost / quantity of output = 900/100 = $9.

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