When a Production Function Can Be Expressed As $$Q = \min \{ a K , B L \}$$

question 6

Multiple Choice

When a production function can be expressed as $$Q = \min \{ a K , B L \}$$ ,the relationship between capital and labor in the production function is that:

• A)capital and labor are perfect substitutes, and the isoquants are linear.
• B)capital and labor must be combined in fixed proportions, and the isoquants are L-shaped.
• C)capital and labor are easily substituted, and the isoquants are convex to the origin.
• D)capital and labor are perfect substitutes, and the isoquants are L-shaped.

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Definitions:

Depreciation Expense

The allocated amount of an asset's cost over its useful life, used to account for declines in value over time.

Financial Expenses

Costs associated with the borrowing of funds or the costs incurred by an investment, including interest payments and other fees.

Cash Budget

A financial plan that estimates cash inflows and outflows over a specific period of time, typically used to manage liquidity.

Depreciation Expense

An accounting method of allocating the cost of a tangible asset over its useful life.