Asked by Emily Apodaca on May 31, 2024
Verified
Two firms, Wickedly Efficient Widgets (WEW) and Wildly Nepotistic Widgets (WNW) , both produce widgets, using the same production function y K1/2L1/2, where K is the amount of labor used and L is the amount of capital used.Each company can hire labor at $1 per unit of labor and capital at $9 per unit.Each company produces 90 widgets per week.WEW chooses its input combinations to produce in the cheapest way possible.Although it produces the same output per week as WEW, WNW is required by its dotty CEO to use twice as much labor as WEW.How much higher are WNW's total costs per week than WEW's?
A) $270
B) $67.50
C) $275
D) $135
E) $132
Labor
Labor represents the human effort, both physical and mental, used in the production of goods and services.
Total Costs
The total of all costs associated with the production of goods or services, encompassing both fixed and variable expenses.
- Ascertain the complete production expenditures by evaluating numerous labor and capital pairings, given explicit cost restrictions.
- Make use of cost minimization approaches to ascertain the optimal resource blend for generating a specified output level.
Verified Answer
ZK
Zybrea KnightJun 06, 2024
Final Answer :
D
Explanation :
WNW's total costs are higher by $135 per week than WEW's due to the requirement to use twice as much labor, which increases their production costs.
Learning Objectives
- Ascertain the complete production expenditures by evaluating numerous labor and capital pairings, given explicit cost restrictions.
- Make use of cost minimization approaches to ascertain the optimal resource blend for generating a specified output level.