The town of Bookville has a massive public library system. Bookville's municipal government faces a tradeoff between retaining the current number of library workers and replacing some of its workers with computers. The four options available to the government are given in table below. Number of workersNumber of computersChoice A3050Choice B20100Choice C10150Choice D5300 Computers and software cost $5,000 each and must be replaced each year. In a non-unionized labor market, workers are paid $20,000 per year. In these circumstances, the optimal choice from a cost perspective for the city government isQuestion 4 options: Choice A Choice B Choice C Choice D

The total cost incurred by a firm operating in a market includes fixed costs and variable costs. Fixed costs are the costs that will not change when there is a change in the quantity of output. Variable costs will change with changes in the quantity of output. Firms in the market is driven by the profit motives. Profit is the revenue in excess of costs. The profits can be increased by increasing the revenue or reducing the costs.The total cost of each choice is calculated by multiplying the price of labor and price of the computer with the quantity of labor and quantity of computer respectively and adding up. Total cost=Price of labor×Quantity of labor+Price of computer×Quantity of computerTotal costChoice A=$20000×30+$5000×50=$850000Total costChoice B=$20000×20+$5000×100=$900000Total costChoice C=$20000×10+$5000×150=$950000Total costChoice D=$20000×5+$5000×300=$1600000 The total cost of choice A, B, C, and D are $850000, $900000, $950000, and $1600000 respectively. The total cost is the lowest for choice A. Therefore the correct option is the first option, choice A.

Answered: The town of Bookville has a massive…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The town of Bookville has a massive public library system. Bookville's municipal government faces a tradeoff between retaining the current number of library workers and replacing some of its workers with computers. The four options available to the government are given in table below.

	Number of workers	Number of computers
Choice A	30	50
Choice B	20	100
Choice C	10	150
Choice D	5	300

Computers and software cost $5,000 each and must be replaced each year. In a non-unionized labor market, workers are paid $20,000 per year. In these circumstances, the optimal choice from a cost perspective for the city government is

Question 4 options:

	Choice A
	Choice B
	Choice C
	Choice D

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