Suppose That the Price of Labor (P_L) Is $10 and the Price

question 82

Multiple Choice

Suppose that the price of labor (P_L) is $10 and the price of capital (P_K) is $20. What is the equation of the isocost line corresponding to a total cost of $100?

• A) P_L + 20P_K
• B) 100 = 10L + 20K
• C) 100 = 30(L+K)
• D) 100 + 30 (P_L + P_K)
• E) none of the above

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Definitions:

Discount Rate

The interest rate used to discount future cash flows to present value, often in investment and finance calculations.

Net Present Value

A calculation that compares the present value of cash inflows to the present value of cash outflows over a period of time to evaluate an investment.

Depreciable Equipment

Tangible assets used in business operations whose cost is allocated over its useful life due to wear and tear, obsolescence, or decay.

Operating Assets

Assets that are used in the day-to-day operations of a business, such as machinery, buildings, and equipment.