Question 1
________ are likely a fixed cost of a firm.
◦ Utility costs
◦ The costs of raw materials used in production
◦ Mortgage payments for a new warehouse
◦ Expenses for holiday office parties
Question 2
Refer to the information provided in Table 8.4 below to answer the question(s) that follow.
Refer to Table 8.4. Assuming the price of capital (
K) is $10 per unit and the price of labor (
L) is $5 per unit, what production technique should this firm use to produce 2 units of output?
◦ production technique A
◦ production technique B
◦ The firm is indifferent between production technique A and production technique B.
◦ It is impossible to determine if the firm should select production technique A or B because total fixed costs are not given.
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