When a Particular Firm Is Fully Utilizing Its Capital, Its

question 17

Multiple Choice

When a particular firm is fully utilizing its capital, its output is given by Y = 10 × L0.5. The cost of labor is $1 per unit. To maximize profit, how many units of labor should this firm use?

• A) 25
• B) 5
• C) 3.16
• D) 100
• E) 50

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Definitions:

Interest Expense

The cost incurred by an entity for borrowed funds; it is the price paid for the use of borrowed money or money earned from deposited funds.

Interest Payable

Refers to the amount of interest that has been incurred on borrowed funds but has not yet been paid out to the lender as of the reporting date.

Current Liabilities

Obligations that a company must pay within the coming year or within its normal operating cycle, indicating the company's short-term financial responsibilities.