Suppose That a Firm's Production Function of Output $Q$ Is a Function of Only Two Inputs, Labor (L) and a Function

question 60

Multiple Choice

Suppose that a firm's production function of output $Q$ is a function of only two inputs, labor (L) and capital $( K )$ and can be written $Q = 25 L K$ with marginal products $M P _ { L } = 25 K$ and $M P _ { K } =$ 25L. Let the wage rate for labor be $w = 1$ and the rental rate of capital be $r = 1$ . If the firm produces 100 units of output, how many units of labor will it use?

• A)1
• B)2
• C)3
• D)4

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Definitions:

Noncash Investing

Transactions that involve the acquisition or disposal of assets not involving immediate cash flow.

Indirect Method

A method used in cash flow statements to calculate net cash flow from operating activities by adjusting net income for changes in non-cash accounts like accounts receivable, accounts payable, and depreciation.

Current Liability

A financial obligation that is due within one year or within the normal operating cycle of the business, whichever is longer.

Indirect Method

A cash flow statement format that starts with net income and adjusts for non-cash transactions and changes in working capital to arrive at net cash provided by operating activities.