Suppose that production for good X is characterized by the following production function, Q = 4K0.5L0.5, where K is the fixed input in the short run. If the per-unit rental rate of capital, r, is $86.80 and the per-unit wage, w, is $20, then the average total cost of using 25 units of capital and 49 units of labor is:
A. $5.25.
B. $31.00.
C. $22.50.
D. There is insufficient information to determine the average total costs.
Answer: C
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