If Output Is Produced According to Q = 4LK, the Price

question 28

Multiple Choice

If output is produced according to Q = 4LK, the price of K is $10, and the price of L is $40, then the cost minimizing cost minimizing combination of K and L capable of producing 64 units of output is

• A)L = 16 and K = 1.
• B)L = 2 and K = 8.
• C)L = 2 and K = 2.
• D)L = 32 and K = 32.
• E)L= 1 and K = 16.

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Definitions:

Total Surplus

The sum of consumer and producer surplus, reflecting the total benefit to society from the production and consumption of goods and services.

Consumer Surplus

The split between the maximum total consumers are prepared to pay for a product or service and the actual payment.

Producer Surplus

The gap between the minimum amount producers are willing to accept for providing a good or service and the actual amount they end up receiving.

Producer Surplus

The additional income a producer receives for selling a good or service above its production cost.