If output is produced according to Q = 4LK, the price of K is $10, and the price of L is $40, then the cost minimizing cost minimizing combination of K and L capable of producing 64 units of output is
A) L = 16 and K = 1.
B) L = 2 and K = 8.
C) L = 2 and K = 2.
D) L = 32 and K = 32.
E) L = 1 and K = 16.

Question

Quizplus · Accepted Answer

To produce 64 units, set 4LK = 64, which simplifies to LK = 16. The cost is minimized when the ratio of the marginal product to price is equal for both inputs. Solving for L and K, L = 2 and K = 8 minimizes cost at $40*2 + $10*8 = $160.

If Output Is Produced According to Q = 4LK, the Price