Suppose the Firm's Production Function Is Q = K^1/3L^2/3, Where

question 60

Multiple Choice

Suppose the firm's production function is Q = K^1/3L^2/3, where the MPK = and MP_L =
)
If the rental rate of capital R is $30 and the wage rate W is $40, then the cost-minimizing capital-to-labor ratio is K/L = ____.

• A) 3/2
• B) 1
• C) 2/3
• D) 1/2

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Definitions:

Periodic Inventory System

An inventory system that records inventory purchases and sales periodically, updating the inventory balance at the end of an accounting period.

Average Cost

A method to determine the cost of goods sold and ending inventory by computing the weighted average of the costs of all goods available for sale.

Net Sales

The total revenue from sales minus returns, allowances, and discounts.

Gross Profit

The financial gain obtained after subtracting the cost of goods sold from net sales revenues, indicating the efficiency of core business operations.