Two Firms, Wickedly Efficient Widgets (WEW) and Wildly Nepotistic Widgets

question 13

Multiple Choice

Two firms, Wickedly Efficient Widgets (WEW) and Wildly Nepotistic Widgets (WNW) , both produce widgets, using the same production function , where K is the amount of labor used and L is the amount of capital used. Each company can hire labor at $1 per unit of labor and capital at $1 per unit. Each company produces 10 widgets per week. WEW chooses its input combinations to produce in the cheapest way possible. Although it produces the same output per week as WEW, WNW is required by its dotty CEO to use twice as much labor as WEW. How much higher are WNW's total costs per week than WEW's?

• A) $5
• B) $10
• C) $15
• D) $2.50
• E) $2

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Definitions:

Microgram

A unit of mass equal to one millionth of a gram, commonly used in medicine and science to measure small weights and doses.

Volume

The amount of space an object, such as a drug, occupies.

Drug

A substance used to diagnose, treat, cure, or prevent diseases in humans or animals, often regulated by health authorities.

Metric Equivalent

The corresponding value of a unit of measure expressed in the International System of Units (SI).