Suppose That Production for Good X Is Characterized by the Following

question 176

Multiple Choice

Suppose that production for good X is characterized by the following production function,Q = 4K^0.5L^0.5,where K is the fixed input in the short run.If the per-unit rental rate of capital,r,is $86.80 and the per-unit wage,w,is $20,then the average total cost of using 25 units of capital and 49 units of labor is:

• A) $5.25.
• B) $22.50.
• C) $31.00.
• D) There is insufficient information to determine the average total costs.

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Definitions:

Direct Labor Hours

The total number of working hours spent by employees directly involved in the production of goods or services.

Machine Hours

A measure of the amount of time a machine is operated, used in manufacturing to allocate costs to products based on machine usage.

Hooded Jacket

A type of apparel that includes a hood attached to it, often used for casual wear or protection against weather.

Departmental Overhead Rate

A calculation used to allocate overhead costs to specific departments, based on varying bases such as labor hours or machine hours.