A Firm's Production Function Is Given By $Q = K L$

question 16

Multiple Choice

A firm's production function is given by $Q = K L$ . The marginal products of labor and capital are, respectively, $M P _ { L } = K$ and $M P _ { K } = L$ . The wage rate of labor is $w = \$ 10$ and the rental rate of capital is $r = \$ 20$ . The firm wants to produce 1,800 units of output in the most efficient way possible. How much does the firm spend?

• A)$2,000
• B)$1,300
• C)$1,200
• D)$1,100

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Definitions:

Annual Interest Rate

The percentage increase in money owed or invested over a year, accounting for the cost of borrowing or the gain on savings.

Compounded

In finance, refers to a method where interest earned is added to the principal, so that, from that moment on, the interest that has been added also earns interest.

Exponential Rate

The rate at which something grows or decays, characterized by a constant ratio over equal increments of time.