Neco 2020 Economics Question 38
Practice objective / multiple choice question 38 from the 2020 Neco Economics examination.
A farmer produces maize using the Cobb‑Douglas production function \(Q=K^{0.4}L^{0.6}\), where \(Q\) is output in tons, \(K\) is the number of capital units (machines) and \(L\) is labour hours. The market price of maize is \(\text{₦}120\) per ton. The rental price of capital is \(\text{₦}200\) per unit and the wage rate is \(\text{₦}15\) per hour. The farmer has a budget of \(\text{₦}12{,}000\) to spend on capital and labour (i.e. \(200K+15L=12{,}000\)). Determine the cost‑minimising combination of \(K\) and \(L\) that will produce exactly 100 tons, and compute the farmer's profit at that output level.
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About This Question
This is Neco 2020 Economics Question 38. It is one of the objective questions from the 2020 Neco Economics examination.
Difficulty level: Hard .
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