Asked by Laisha Franco on May 30, 2024

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the production function is f(L, M)  4L1/2 M1/2, where L is the number of units of labor and M is the number of machines used.If the cost of labor is $9 per unit and the cost of machines is $81 per unit, then the total cost of producing 10 units of output will be

A) $270.
B) $90.
C) $135.
D) $450.
E) None of the above.

Total Cost

Total cost is the sum of all expenses incurred in the production of goods or services, including fixed and variable costs.

Labor

The effort by humans to produce goods or services in exchange for wages or salary.

Machines

Mechanical or electrical devices that perform or assist in performing tasks or calculations.

  • Work out the overall production expenditure by accounting for the costs of labor and machines.
  • Examine the effect of fluctuating costs of inputs on the expenses associated with production.
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AJ
Aadesh JalotaJun 02, 2024
Final Answer :
C
Explanation :
The total cost of production is the sum of the cost of labor and the cost of machines used:

Cost of labor: $9 per unit of labor * L units of labor
Cost of machines: $81 per unit of machines * M units of machines

We need to find the values of L and M that minimize the total cost of production, subject to the constraint that 10 units of output are produced. We can solve for L and M using the Lagrange multiplier method:

minimize C = 9L + 81M
subject to f(L, M) = 10

The Lagrangian function is:

L = 9L + 81M + λ(10 - f(L, M))

Taking partial derivatives of L with respect to L and M, and setting them equal to 0, we get:

∂L/∂L = 9 - λF11/2 = 0
∂L/∂M = 81 - λF11/2 = 0

We also need to take the partial derivative of L with respect to λ:

∂L/∂λ = 10 - f(L, M) = 0

Solving these equations simultaneously, we get:

F11/2 = 1/9
81/9 = F11/2
F11/2 = 9

Substituting F11/2 = 9 into the production function, we get:

f(L, M) = 10 = 4L1/2 * 9M1/2

Simplifying, we get:

L^(1/2)M^(1/2) = 10/36

We want to find the values of L and M that satisfy this equation and minimize the cost function. Substituting L^(1/2)M^(1/2) = 10/36 into the cost function, we get:

C = 9L + 81M = 9(36L^(1/2)M^(1/2)) + 81M = 324(LM)^(1/2) + 81M

Substituting LM = (10/36)^2, we get:

C = 324(10/36) + 81(10/36) = $90

Therefore, the total cost of producing 10 units of output is $90, and the best choice is (C).