Question

What are the steps for the correct answer which is starred.

Peabody Coal faces a perfectly competitive market for its cust only employer in its labor market, confronting a The output it can produce with " e input. Peabody Coal: Your firm's production function is Cobb-Douglas, with quantity produced Q = 25% 0.2529.75. For this function we have a = 18.75K0.25 2 - 0.25 and 2 = 6.25K-0.7520:75. The wage paid to labor w = $960/unit of labor. The rental rate of capital is r = $20/unit of capital. In the long run the minimum per unit cost of producing Q = 1,000 units of output equals dollars per unit. a) 6.40 b) 12.80 c) 25.60 d) 51.20 e) None of the above are correct. CLEAR

Answer 1

Correct option: (c) $25.60

At the oftmal point, MPL - W MPK 18.75 +0.25 -0.25 6.25 K -0.75, 0.75 = 96 20 34 =48 Nowi o = 25 Kº k=16L 0=25 x 6.25, 0.75 1000 = 25 ( 16 (20.25, 0.75 1000 = 50L. l=20 So, R = 16x20=320 Cost = wherk C = (960X20) + ( 20x320) c = 25600 AC 10 g = 296.00 = $256 |