Suppose That Production for Good X Is Characterized by the Following

question 5

Multiple Choice

Suppose that production for good X is characterized by the following production function,Q = K^0.5L^0.5,where K is the fixed input in the short run.If the per-unit rental rate of capital,r,is $15 and the per-unit wage,w,is $125,then the average fixed cost of using 16 units of capital and 25 units of labor is:

• A) $9.
• B) $12.
• C) $56.
• D) There is insufficient information to determine the average fixed costs.

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Definitions:

Efficiency

The state of optimizing resources to achieve the highest possible output with the least waste of inputs.

Tax Efficiency

A measure of how much of an investment's return is left after taxes, indicating the effectiveness of minimizing tax liability through investment choices.

Revenue

The total income generated by the sale of goods or services before any costs or expenses are deducted.

FICA Taxes

Taxes levied by the Federal Insurance Contributions Act in the United States to fund Social Security and Medicare programs, deducted from workers' paychecks.