Refer to the Information Provided in Table 8 -Refer to Table 8

question 152

Multiple Choice

Refer to the information provided in Table 8.1 below to answer the questions that follow.
Table 8.1 $$\begin{array} { l c c c } \text { Produce } & \begin{array} { c } \text { Using } \\\text { Techniques }\end{array} & \begin{array} { c } \text { Units of Variable } \\\text { K }\end{array} & \begin{array} { c } \text { Inputs } \\\text { L }\end{array} \\\hline \text { 1 unit of output } & & & \\& \text { A } & 8 & 8 \\& \text { B } & 4 & 12 \\2 \text { units of output } & & & \\& \text { A } & 14 & 12 \\& \text { B } & 8 & 20 \\3 \text { units of output } & & & \\& \text { A } & 16 & 12 \\& \text { B } & 12 & 22\end{array}$$
-Refer to Table 8.1. Assuming the price of labor (L) is $5 per unit and the price of capital (K) is $10 per unit, what production technique should this firm use to produce 2 units of output?

• A) Production technique A
• B) Production technique B
• C) The firm is indifferent between production technique A and production technique B.
• D) It is impossible to determine if the firm should select production technique A or B because total fixed costs are not given.

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Definitions:

Equivalent Ratio

A ratio obtained from another ratio by multiplying each term by the same number, or by dividing each term by the same number.

Smallest Term

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