CFA Practice Question

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CFA Practice Question

Suppose that an additional unit of output would require 5 additional hours of labor and 7 additional units of materials. If the wage is $15 per hour and the price of materials is $2 per unit, what is the marginal cost of production?
Correct Answer: $89

The marginal cost is the cost of inputs necessary to produce 1 more unit of output. In this case, the marginal cost is (5 * $15) + (7 * $2) = $89.

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