Given the Simple Production Function Q = 3K + 4L

question 62

Multiple Choice

Given the simple production function Q = 3K + 4L, where L is the quantity of labor employed and K is the quantity of capital employed, assuming K = 2 and L = 3, what would it mean if output was less than 18?

• A) The firm is out of business.
• B) The firm is not employing labor and capital efficiently.
• C) The production function was not specified correctly.
• D) Labor is less productive than capital.

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Definitions:

Financial Statements

Formal records of the financial activities and condition of a business, entity, or individual, including balance sheet, income statement, and cash flow statement.

ROA

Return on Assets, a financial ratio that indicates how profitable a company is relative to its total assets, measuring how efficient management is in using assets to generate earnings.

Debt/Equity Ratio

A financial ratio indicating the relative proportion of shareholders' equity and debt used to finance a company's assets.

ROE

Return on Equity, a measure of financial performance calculated by dividing net income by shareholders' equity, indicating how efficiently a company is using its equity to create profits.