A Firm's Production Function Is Given by Q = KL $(L, K)$

question 14

Multiple Choice

A firm's production function is given by Q = KL. The marginal products of labor and capital are, respectively, MP_L = K and MP_K = L. The wage rate of labor is w = $10 and the rental rate of capital is r = $20. What is the most efficient combination of labor and capital $(L, K)$ that also yields a cost of exactly $1000?

• A) (10, 45)
• B) (25, 50)
• C) (50, 25)
• D) (20, 40)

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Definitions:

Central Tendency

A statistical measure that identifies a single value as representative of the middle of a dataset, commonly by using the mean, median, or mode.

Variance

A measure of the distribution of data points in a data set around the mean, indicating how spread out the data points are.

Z-score

A statistical measure representing the number of standard deviations a data point is from the mean of its data set, used in standardizing scores for comparison.

Probability Sampling

Sampling based on random selection of the sample units.