Question

.     A new metal alloy is discovered that uses copper and zinc in fixed proportions where...

.     A new metal alloy is discovered that uses copper and zinc in fixed proportions where each unit of the alloy requires 4 units of zinc and 2 units of copper. If no other inputs are required, if the price of zinc is $2 per unit, and the price of copper is $5 per unit and if total output is 4,000 units, what is the average cost per unit of output?

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Answer #1

1 unit of alloy requires 4 units of zinc and 2 units of copper.

So, production of 4,000 units of alloy will need, (4*4,000) 16,000 units of zinc and (2*4,000) 8,000 units of copper.

1 unit of zinc costs $2. So, 16,000 units of zinc will cost (16,000 * $2) $32,000.

1 unit of copper costs $5. So, 8,000 units of copper will cost (8,000 * $5) $40,000.

So, the total cost of producing 4,000 units of alloy is ($32,000 + $40,000) $72,000.

Calculate the average cost per unit of output -

Average cost = Total cost/Total output = $72,000/4,000 = $18

Thus,

The average cost per unit of output is $18.

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