The Production Function Is F(L, M)= 4L^1/2 M^1/2, Where L

question 1

Multiple Choice

the production function is f(L, M) = 4L^1/2 M^1/2, where L is the number of units of labor and M is the number of machines used.If the cost of labor is $25 per unit and the cost of machines is $64 per unit, then the total cost of producing 6 units of output will be

• A)$240.
• B)$150.
• C)$267.
• D)$120.
• E)None of the above.

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Definitions:

Operating Leverage

A measure of how revenue growth translates into growth in operating income, indicating the degree to which a company can leverage fixed costs.

Capital Intensive

Refers to industries or businesses that require large amounts of money to buy, maintain, or improve their assets such as property, plants, and equipment.

Variable Costs

Costs associated with a business that fluctuate according to operational levels.

Operating Leverage

The degree to which a firm or project can increase operating income by increasing revenue, highlighting the effects of fixed costs.