A firm uses two inputs, labor (L) and capital (K) in the production of umbrellas.It can invest $50,000 in the purchase of the two inputs annually.The firm hires 5 units of capital at $1,000 per unit.If the going annual wage rate is $4,500, calculate the number of workers employed by the firm.(Assume that the firm spends the entire budget on K and L.)
A)10
B)5
C)15
D)9

Question

Quizplus · Accepted Answer

The firm spends $5,000 on capital (5 units at $1,000 each), leaving $45,000 for labor. At a wage rate of $4,500 per worker, the firm can hire 10 workers.

A Firm Uses Two Inputs, Labor (L) and Capital (K)