Refer to Figure 7.11. If the firm's cost of capital is $18 per unit, then its cost of labor is ________ per unit.

A) $1.80
B) $9
C) $36
D) $900

Question

Refer to Figure 7.11. If the firm's cost of capital is $18 per unit, then its cost of labor is ________ per unit.A)  $1.80B)  $9C)  $36D)  $900

Madison Mills · Accepted Answer

Final Answer : C, Explanation :  Given the cost of capital is $18 per unit, and assuming Figure 7.11 shows a production function with constant returns to scale, the cost of labor would be twice the cost of capital if the inputs are perfect substitutes. Therefore, the cost of labor per unit would be $36.

Refer to Figure 7.11. If the firm's cost of capital is $18 per unit, then its cost of labor is ________ per unit.

A) $1.80
B) $9
C) $36
D) $900

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