Suppose for a particular production function, the cost-minimizing level of labor is $L = 2 Q$ and the cost-minimizing level of capital is $K = 5 Q$ . If $w = 5$ and $r = 2$ , the long-run total cost curve is
A) $T C = 7 Q$
B) $T C = 7$
C) $T C = 20 Q$
D) $T C = 20$

Question

Quizplus · Accepted Answer

The long-run cost function is given by:

$$TC = wL + rK$$

Substitute given values:

$$TC = 5(2Q) + 2(5Q) = 20Q$$

Therefore, the correct answer is (C).

Suppose for a Particular Production Function, the Cost-Minimizing Level of Labor