1. The demand for an input is: a. the VMP of the input. b. derived from input ow

Question

1. The demand for an input is:

a. the VMP of the input.

b. derived from input owner's profit-maximizing condition.

c. determined by MPL = W.

d. sloping upward.

2. Suppose that production for good X is characterized by the following production function, Q = K0.5L0.5, where K is the fixed input in the short run. If the per-unit rental rate of capital, r, is $25 and the per-unit wage, w, is $15, then the fixed cost of using 81 units of capital and 9 units of labor is:

a. $135.

b. $2,025.

c. There is insufficient information to determine the fixed costs.

d. $2,160.

Explanation / Answer

1. The demand for an input is: a. the VMP of the input. b. derived from input ow

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