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 fixed cost of producing 80 units of output?

Question

Quizplus · Accepted Answer

Total fixed cost is the cost of the fixed inputs, which in this case is capital. Since capital is fixed at 8 units and the price per unit of capital is $25, the total fixed cost is 8 units * $25/unit = $200.

Output for a Simple Production Process Is Given by Q