Firm Omega uses capital K and labor L to produce output q. The firm's production function is...
Question:
Firm Omega uses capital K and labor L to produce output q. The firm's production function is F(K,L) = 12K+3L. The prices of capital and labor are r = 40 and w=4, respectively. In the long-run, when the firm produces q=720 units of output, the total cost is:
A) C = 1,200
B) C = 960
C) C = 480
D) C = 240
E) C = 1,680
Perfect Substitutes:
In economics, two goods are said to be perfect substitutes if one good could be substituted for another one at a fixed proportion, regardless of prices, without reducing utility to the consumer. Perfect substitutes are perhaps hard to find in absolute terms, but close examples include butter produced from different farms, bottle waters from different manufacturers.
Answer and Explanation: 1
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View this answerThe answer is B).
Note first that the production in this case features perfect substitutes. Specifically, one unit of capital can always substitute...
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