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 $12 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. $9.14.
B. $6.25.
C. $10.07.
D. There is insufficient information to determine the average total costs.
Answer: A
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A) A B) B C) C D) D E) E
A manager invests $400,00 . in a technology to reduce overall costs of production. The company managed to reduce their cost per unit from $2 to $1.85 . Ceteris peribus, if the firm continues its production in the same economic environment, the firms accounting profits should
a. increase b. decrease c. stay the same d. does not affect profits
If the elasticity of demand is much greater than the elasticity of supply, an excise tax levied on the suppliers will
a. cause the suppliers to incur a greater burden of the tax than demanders b. cause the demanders to incur a greater burden of the tax than suppliers c. the burden of the tax will be shared equally between the suppliers and the demanders d. cause the entire burden of the tax to rest on the demanders e. Without more information as to the amount of the excise tax, who will incur a greater burden will be unclear
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