Following Is a Firm's Expansion Path $\quad$ $\quad$ $\quad$

question 49

Multiple Choice

Following is a firm's expansion path.The price of capital is $5 per unit; the price of labor is $2 per unit. $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$$\text { Ontimal Input Choice }$
$\begin{array}{c}\begin{array}{c}\text {Units of Output}\\10\\20\\30\end{array}\begin{array}{c}\text {Units of Capital}\\6\\8\\13\end{array}\begin{array}{c}\text {Units of Labor}\\5\\10\\20\end{array}\end{array}$

When output is 20 units,what is long-run average cost?

• A)$2
• B)$3.50
• C)$4
• D)$4.50
• E)none of the above

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Definitions:

Cardinal Utility Function

Utility function describing by how much one market basket is preferred to another.

Ordinal Utility Function

Utility function that generates a ranking of market baskets in order of most to least preferred.

Budget Line

A graphical representation of all possible combinations of two goods that can be purchased with a given budget and prices.

Slope

The rate at which a line or curve inclines or declines, indicating the steepness.