Recall That Touchie McFeelie's Production Function for Comics Books Is

question 12

Multiple Choice

Recall that Touchie McFeelie's production function for comics books is 0.1J^1/2 L^3/4.Suppose that Touchie can vary both jokes and cartoonists' labor.If old jokes cost $2 each and cartoonists' labor costs $12 per hour, then the cheapest way to produce comics books requires using jokes and labor in the ratio

• A)J/L = 6.
• B)J/L = 2.
• C)J/L = 2/3.
• D)J/L = 8.
• E)J/L = 4.

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Definitions:

Allocative Efficiency

A state of the economy where the distribution of resources among different uses is optimal, with no one able to be made better off without making someone else worse off.

Marginal Benefits

The bonus satisfaction or utility acquired from consuming an additional unit of a product or service.

Marginal Costs

The increase in expense associated with manufacturing an additional unit of a product or service.

Moral Hazard

A situation in which one party engages in risky behavior or fails to act in good faith because the negative consequences are borne by another party.