Suppose a Firm's Production Function Can Be Specified As $Q = 10 K L$

question 60

Multiple Choice

Suppose a firm's production function can be specified as $Q = 10 K L$ . This firm's cost function exhibits

• A) economies of scale
• B) diseconomies of scale
• C) neither diseconomies nor economies of scale.
• D) economies of scale for output levels less than some level, \(Q _ { 1 } = 1 / 4\), and diseconomies of scale thereafter.

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Definitions:

Fixed Costs

Fixed expenses unaffected by the volume of production or sales, like rent, insurance, and wages.

Sensitivity

In finance, sensitivity indicates how much the value of an investment or project changes in response to changes in underlying variables, such as interest rates or market conditions.

Net Present Value

The financial difference calculated by subtracting cash outflows’ present value from cash inflows’ present value during a set period.

Sales Quantity

The total volume or number of units sold of a product or service within a specified time frame.