Neco Model Questions Vol1 2022 Economics Question 17

Practice objective / multiple choice question 17 from the 2022 Neco Model Questions Vol1 Economics examination.

Neco Model Questions Vol1 2022 Economics Objective / Multiple Choice Medium Difficulty
Question 17 NECO_MODEL_QUESTIONS_VOL1 • 2022 • ECONOMICS • objective

A firm produces output according to the Cobb‑Douglas function \(Q = 0.5\,L^{0.6}K^{0.4}\). The wage rate is \(\text{₦}2\) per unit of labour and the rental rate of capital is \(\text{₦}4\) per unit of capital. The firm can spend at most \(\text{₦}10,000\) on labour and capital combined.\n\nDetermine the cost‑minimising quantities of labour \(L\) and capital \(K\) that the firm should employ, and compute the maximum output it can produce with the given budget.

Answer Options

Correct Answer A. Labour L = 3,000 units, Capital K = 1,000 units; maximum output ≈ 968 units.
B. Labour L = 3,500 units, Capital K = 800 units; maximum output ≈ 1,050 units.
C. Labour L = 2,000 units, Capital K = 1,500 units; maximum output ≈ 720 units.
D. Labour L = 2,500 units, Capital K = 1,250 units; maximum output ≈ 850 units.
Correct Answer
A
Correct Option:
Labour L = 3,000 units, Capital K = 1,000 units; maximum output ≈ 968 units.

About This Question

This is Neco Model Questions Vol1 2022 Economics Question 17. It is one of the objective questions from the 2022 Neco Model Questions Vol1 Economics examination.

Difficulty level: Medium .

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