Gce Model Questions Vol1 2018 Economics Question 19

Practice objective / multiple choice question 19 from the 2018 Gce Model Questions Vol1 Economics examination.

Gce Model Questions Vol1 2018 Economics Objective / Multiple Choice Medium Difficulty
Question 19 GCE_MODEL_QUESTIONS_VOL1 • 2018 • ECONOMICS • objective

A firm produces output according to the Cobb‑Douglas function \(Q = L^{0.5}K^{0.5}\). The price of labour is \(w = £4\) per unit and the price of capital is \(r = £16\) per unit. The firm wishes to produce \(Q = 100\) units at minimum cost. Determine the cost‑minimising quantities of labour and capital, the total cost, and the marginal rate of technical substitution (MRTS) at the optimum.

Answer Options

A. Labour L = 200 units, Capital K = 50 units; Minimum total cost = £1,600; MRTS = 0.40.
B. Labour L = 250 units, Capital K = 40 units; Minimum total cost = £1,800; MRTS = 0.20.
C. Labour L = 150 units, Capital K = 75 units; Minimum total cost = £1,500; MRTS = 0.33.
Correct Answer D. Labour L = 200 units, Capital K = 50 units; Minimum total cost = £1,600; MRTS = 0.25.
Correct Answer
D
Correct Option:
Labour L = 200 units, Capital K = 50 units; Minimum total cost = £1,600; MRTS = 0.25.

About This Question

This is Gce Model Questions Vol1 2018 Economics Question 19. It is one of the objective questions from the 2018 Gce Model Questions Vol1 Economics examination.

Difficulty level: Medium .

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