Question

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. What is the total fixed cost of producing 80 units of output?

a. 200
b. 125
c. 175
d. 75

Answer 1

total fixed cost of producing 80 units of output is $200

Step-by-step explanation:

Given data

Q = 2KL

capital = $25 per unit

short run = 8 units

price of labor = $5 per unit

to find out

total fixed cost

solution

to find total fixed cost

we will get by product of price of capital and fixed capital in short run

that is

total cost = 25 × 8

total cost =200

so the total fixed cost of producing 80 units of output is $200