Output is produced according to Q = 4LK,where L is the quantity of labor input and K is the quantity of capital input.If the price of K is $10 and the price of L is $5,then the cost-minimizing combination of K and L capable of producing 32 units of output is:
A) L = 8 and K = 1.
B) L = 4 and K = 2.
C) L = 2 and K = 2.
D) L = 2 and K = 4.
E) L = 1 and K = 8.

Question

Quizplus · Accepted Answer

To produce 32 units, Q = 4LK = 32, so LK = 8. The cost is minimized when the ratio of the marginal product to price is equal for both inputs. Testing combinations, L = 4 and K = 2 gives a cost of $40, which is the minimum.

Output Is Produced According to Q = 4LK,where L Is