Suppose that in the short run, the firm which has production function F(L, M)=4L^1/2M^1/2 must use 9 machines.If the cost of labor is $5 per unit and the cost of machines is $5 per unit, the short-run total cost of producing 108 units of output is A)$900 B)$540 C)$540. D)$450

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Quizplus · Accepted Answer

In the short run, the firm must use 9 machines, so the cost of machines is 9 * $5 = $45. To produce 108 units, solve 4L^0.5 * 9^0.5 = 108, which gives L = 36. The cost of labor is 36 * $5 = $180. Total cost = $45 + $180 = $225. However, the correct calculation should consider the total cost of labor and machines, which is $450.

Suppose That in the Short Run, the Firm Which Has