Refer to the information provided in Table 8.1 below to answer the questions that follow.
Table 8.1 $$\begin{array} { l c c c }
\text { Produce } & \begin{array} { c }
\text { Using } \
\text { Techniques }
\end{array} & \begin{array} { c }
\text { Units of Variable } \
\text { K }
\end{array} & \begin{array} { c }
\text { Inputs } \
\text { L }
\end{array} \
\hline \text { 1 unit of output } & & & \
& \text { A } & 8 & 8 \
& \text { B } & 4 & 12 \
2 \text { units of output } & & & \
& \text { A } & 14 & 12 \
& \text { B } & 8 & 20 \
3 \text { units of output } & & & \
& \text { A } & 16 & 12 \
& \text { B } & 12 & 22
\end{array}$$
-Refer to Table 8.1. Assuming the price of labor (L) is $5 per unit and the price of capital (K) is $10 per unit, what production technique should this firm use to produce 2 units of output?
A) Production technique A
B) Production technique B
C) The firm is indifferent between production technique A and production technique B.
D) It is impossible to determine if the firm should select production technique A or B because total fixed costs are not given.

Question

Refer to the information provided in Table 8.1 below to answer the questions that follow.
Table 8.1 $$\begin{array} { l c c c } 
\text { Produce } & \begin{array} { c } 
\text { Using } \
\text { Techniques }
\end{array} & \begin{array} { c } 
\text { Units of Variable } \
\text { K }
\end{array} & \begin{array} { c } 
\text { Inputs } \
\text { L }
\end{array} \
\hline \text { 1 unit of output } & & & \
& \text { A } & 8 & 8 \
& \text { B } & 4 & 12 \
2 \text { units of output } & & & \
& \text { A } & 14 & 12 \
& \text { B } & 8 & 20 \
3 \text { units of output } & & & \
& \text { A } & 16 & 12 \
& \text { B } & 12 & 22
\end{array}$$
-Refer to Table 8.1. Assuming the price of labor (L) is $5 per unit and the price of capital (K) is $10 per unit, what production technique should this firm use to produce 2 units of output?
A) Production technique A
B) Production technique B
C) The firm is indifferent between production technique A and production technique B.
D) It is impossible to determine if the firm should select production technique A or B because total fixed costs are not given.

Quizplus · Accepted Answer

To produce 2 units of output:
- Production technique A requires 2 units of labor at a cost of $5 per unit, for a total cost of $10. It also requires 4 units of capital at a cost of $10 per unit, for a total cost of $40. Therefore, the total cost of using production technique A to produce 2 units of output is $50.
- Production technique B requires 3 units of labor at a cost of $5 per unit, for a total cost of $15. It also requires 3 units of capital at a cost of $10 per unit, for a total cost of $30. Therefore, the total cost of using production technique B to produce 2 units of output is $45.

Since production technique B has a lower total cost than production technique A, the firm should use production technique B to produce 2 units of output.

Refer to the Information Provided in Table 8 -Refer to Table 8