Two Firms, Wickedly Efficient Widgets (WEW)and Wildly Nepotistic Widgets (WNW)

question 6

Multiple Choice

Two firms, Wickedly Efficient Widgets (WEW) and Wildly Nepotistic Widgets (WNW) , both produce widgets, using the same production function y = K^1/2L^1/2, where K is the amount of labor used and L is the amount of capital used.Each company can hire labor at $1 per unit of labor and capital at $1 per unit.Each company produces 10 widgets per week.WEW chooses its input combinations to produce in the cheapest way possible.Although it produces the same output per week as WEW, WNW is required by its dotty CEO to use twice as much labor as WEW.How much higher are WNW's total costs per week than WEW's?

• A)$5
• B)$10
• C)$15
• D)$2.50
• E)$2

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Definitions:

Strategy

A comprehensive plan guiding resource allocation to achieve long-term organization goals.

Lack of Participation Error

A situation in decision-making processes where not all relevant parties are included, which can lead to suboptimal outcomes and reduced acceptance of decisions.

Strategic Planning

The process of defining an organization's strategy and making decisions on allocating its resources to pursue this strategy.

Key Persons

Individuals who hold critical importance within an organization or project, often due to their skills, knowledge, or position.