Let a Firm Use Labor $( L )$ And Capital (K) as Its Only Inputs to Produce an (K)

question 51

Multiple Choice

Let a firm use labor $( L )$ and capital (K) as its only inputs to produce an output, $Q$ . The cost of labor is $w = \$ 5$ per labor hour and the cost of capital is $r = \$ 15$ per machine hour. What is the equation of the $\$ 1.5$ -million isocost line?

• A) \(1.5 m = L + K\).
• B) \(1.5 \mathrm {~m} = 5 \mathrm {~L} + 15 \mathrm {~K}\).
• C) \(1.5 \mathrm {~m} = ( 5 \mathrm {~L} ) ( 15 \mathrm {~K} )\).
• D) \(1.5 \mathrm {~m} = ( 5 \mathrm {~L} + 15 \mathrm {~K} ) Q\).

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Definitions:

Firm's Profits

The financial gain achieved by a company, which is the difference between its revenue and its expenses.

Quick Response

A business strategy aimed at decreasing lead times and enhancing flexibility in operations to meet customer demand efficiently.

Manufacturer Profit

The financial gain a manufacturing company secures from its operations after deducting costs associated with production and distribution.

Short Term

A period of time that is immediate or not far in the future, usually less than a year, often used in reference to planning or financial strategies.