Firm A can produce a unit of output with 10 hours of labour and 5 units of capital. Firm B can produce a unit of output with 5 hours of labour and 10 units of capital. Firm C can produce a unit of output with 10 hours of labour and 10 units of capital. If the prices of labour and material are $10 and $5, respectively which firm is technologically efficient?
A)A only
B)B only
C)C only
D)A and B
E)A and C

Question

Quizplus · Accepted Answer

Firm A uses 10 hours of labor ($100) and 5 units of capital ($25) totaling $125. Firm B uses 5 hours of labor ($50) and 10 units of capital ($50) totaling $100. Firm C uses 10 hours of labor ($100) and 10 units of capital ($50) totaling $150. Firm B has the lowest cost, making it technologically efficient.

Firm a Can Produce a Unit of Output with 10