A Firm's Production Function Is Given By $Q = K ^ { 2 } L$

question 71

Multiple Choice

A firm's production function is given by $Q = K ^ { 2 } L$ . The marginal products of labor and capital are, respectively, $M P _ { L } = K ^ { 2 }$ and $M P _ { K } = 2 K L$ . Further, the wage rate is $w = \$ 10$ and the rental rate of capital is $r = \$ 20$ . Suppose that the firm wants to produce 27,000 units of output in the most efficient way possible. How much does the firm spend?

• A)$600
• B)$900
• C)$1,500
• D)$2,100

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Definitions:

Price Level

The collective median of current prices for goods and services in the economy.

Short-Run Aggregate Supply Curve

A curve that shows the relationship between the price level and the quantity of goods and services that firms are willing and able to supply in the short run.

Quantity Supplied

The total amount of a good or service that producers are willing and able to sell at a given price over a specific time period.

Price Level

An index reflecting the overall cost of commodities and services within an economy during a particular period.