Suppose a factory produces 100 units of output per month and it is deciding how much labor and...
Question:
Suppose a factory produces 100 units of output per month and it is deciding how much labor and capital it should hire. If labor costs $200 per unit and capital costs $400 per unit, which of the following combinations of labor and capital should the firm use to produce the 100 units of output?
a) 80 units of labor and 0 units of capital.
b) 20 units of labor and 40 units of capital.
c) 10 units of labor and 70 units of capital.
d) 50 units of labor and 10 units of capital.
Input Resources in Production:
Various combinations of input resources such as capital, labor, land etc. may be used to yield the same output. The objective of any firm is to minimize the total cost and to maximize the total profits. Hence, there are some optimum combinations may yield the minimum cost and the maximum profit.
Answer and Explanation: 1
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View this answerThe correct answer to the given question is option d) 50 units of labor and 10 units of capital.
Case a) - 80 units of labor and 0 units of capital
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Factors of Production in Economics: Definition, Importance & Examples
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Chapter 3 / Lesson 45
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The resources that companies use in the production of goods and services are described as the 'factors of production'. Dive into examples to learn the key terms and types of factors (land, labor & capital), and their importance in modern economics.
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