Suppose That in the Short Run, the Firm Which Has

question 3

Multiple Choice

Suppose that in the short run, the firm which has production function F(L, M) = 4L^1/2M^1/2 must use 9 machines.If the cost of labor is $10 per unit and the cost of machines is $4 per unit, the short-run total cost of producing 60 units of output is

• A)$420.
• B)$600.
• C)$240.
• D)$572.
• E)$286.

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Definitions:

Business Risks

The exposure a company or organization faces from factors that may affect its ability to achieve its objectives or financial goals.

Financial Risks

The risk of experiencing financial loss from an investment or entrepreneurial activity.

Financial Leverage

The use of borrowed funds to increase the potential return of an investment, which also increases the risk of loss.

Sensitivity of EPS

The degree to which a company's earnings per share (EPS) is affected by fluctuations in its operating income.