Output for a simple production process is given by Q = 2KL, where K denotes capital, and L denotes labor. The price of capital is $25 per unit and capital is fixed at 8 units in the short run. The price of labor is $5 per unit. What is the total cost of producing 80 units of output?

Question

Quizplus · Accepted Answer

To produce 80 units, set Q = 2KL = 80. With K fixed at 8, solve for L: 2(8)L = 80, so L = 5. Total cost = (Price of K * K) + (Price of L * L) = (25 * 8) + (5 * 5) = 200 + 25 = 225.

Output for a Simple Production Process Is Given by Q