Question

Output for a simple production process is given by Q = 2KL, where K denotes capital, and L denotes labor. The price of capital is $25 per unit, and capital is fixed at 8 units in the short run. Labor costs $5 per labor unit. What is the variable cost of producing 240 units of output?

A. $112.50
B. $75
C. $37.50
D. $150

Answer 1

The variable cost of producing 240 units of output is $1200.

Step-by-step explanation:

To calculate the variable cost of producing 240 units of output, we need to determine the total cost of labor. For each unit of labor, the cost is $5. Therefore, the total cost of labor for 240 units is $5 * 240 = $1200.

The variable cost of producing 240 units is equal to the cost of labor, which is $1200.