Question

The production of sunglasses is characterized by the production
function *Q(L,K)= 4L^**1/2**K^**1/2*.
Suppose that the price of labor is $10 per unit and the price of
capital is $90 per unit. In the short-run, capital is fixed at
2,500. The firm must produce 36,000 sunglasses. How much money is
it sacrificing by not having the ability to choose its level of
capital optimally? That is, how much more does it cost to produce
36,000 sunglasses the short-run compared to the long-run?

a. $9,000

b. $81,000

c. $225,000

d. $171,000

e. $171,525

Answer #1

The production of sunglasses is characterized by the production
function Q(L,K)= 4L1/2K 1/2 . Suppose that the price of labor is
$10 per unit and the price of capital is $90 per unit. In the
short-run, capital is fixed at 2,500. The firm must produce 36,000
sunglasses. How much money is it sacrificing by not having the
ability to choose its level of capital optimally? That is, how much
more does it cost to produce 36,000 sunglasses the short-run
compared...

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