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Questions › UoH › UoH 2020 › Q82
1 mark, −0.33Microeconomics › Costs of production › Cost minimisation and long-run input choiceModerateabout 2 min

UoH 2020 Question 82: Costs of production

Given Q=100K0.5L0.5Q = 100 K^{0.5} L^{0.5}Q=100K0.5L0.5, w (price of labour) = 30, and r (price of capital) = 40. What is the capital (K) Labour (L) ratio the firm should use in order to minimize the cost of producing 1444 units of output?

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Plain-text version

Given Q = 100 K⁰·⁵ L⁰·⁵, w (price of labour) = 30, and r (price of capital) = 40. What is the capital (K) Labour (L) ratio the firm should use in order to minimize the cost of producing 1444 units of output? (A) 1 (B) 4/3 (C) 3/4 (D) Insufficient Information

Also written as: Given Q = 100 K^(0.5) L^(0.5), w (price of labour) = 30, and r (price of capital) = 40. What is the capital (K) Labour (L) ratio the firm should use in order to minimize the cost of producing 1444 units of output?

Costs of production has come up 83 times in 7 exams since 2006.

What this question tests

This question is on Cost minimisation and long-run input choice, part of Costs of production in Microeconomics.

Choosing inputs to produce a given output at least cost, including across several plants.

TestStop has 22 past-paper questions on this subtopic; the nearest in year are below.

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Question from the UoH 2020 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.