Gce Model Questions Vol1 2025 Economics Question 47

Practice objective / multiple choice question 47 from the 2025 Gce Model Questions Vol1 Economics examination.

Gce Model Questions Vol1 2025 Economics Objective / Multiple Choice Hard Difficulty
Question 47 GCE_MODEL_QUESTIONS_VOL1 • 2025 • ECONOMICS • objective

A firm produces output \(Q\) using labour \(L\) and capital \(K\) according to the Cobb‑Douglas production function \(Q = 2 L^{0.5} K^{0.5}\). The wage rate is £10 per unit of labour and the rental rate of capital is £20 per unit. Fixed costs are £500. The firm wishes to produce \(Q = 200\) units at minimum total cost. Determine the cost‑minimising quantities of labour and capital (to two decimal places), the resulting total cost, and state whether the production function exhibits increasing, constant, or decreasing returns to scale at this output level.

Answer Options

Correct Answer A. L = 141.42, K = 70.71, Total Cost = £3328.40, Returns to scale = Constant
B. L = 150.00, K = 75.00, Total Cost = £3500.00, Returns to scale = Constant
C. L = 141.42, K = 70.71, Total Cost = £3328.40, Returns to scale = Increasing
D. L = 130.00, K = 65.00, Total Cost = £3100.00, Returns to scale = Decreasing
Correct Answer
A
Correct Option:
L = 141.42, K = 70.71, Total Cost = £3328.40, Returns to scale = Constant

About This Question

This is Gce Model Questions Vol1 2025 Economics Question 47. It is one of the objective questions from the 2025 Gce Model Questions Vol1 Economics examination.

Difficulty level: Hard .

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