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elena55 [62]
4 years ago
12

Output for a simple production process is given by Q = 2KL, where K denotes capital, and L denotes labor. The price of capital i

s $25 per unit and capital is fixed at 8 units in the short run. The price of labor is $5 per unit. What is the total fixed cost of producing 80 units of output?
Business
1 answer:
11111nata11111 [884]4 years ago
4 0

Answer:

Fixed costs= $200

Explanation:

Giving the following information:

Output for a simple production process is given by Q = 2KL, where K denotes capital, and L denotes labor. The price of capital is $25 per unit and capital is fixed at 8 units in the short run. The price of labor is $5 per unit.

In this case, labor is a variable cost, the more you produce, the bigger it gets (total variable costs, unitary remains the same).

So, our only fixed cost is capital. We know that in a short run capital equals 8 units

Fixed costs= $25*8= 200

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