. Indicate whether each of the following statements is possibly true or certainl

Question

. Indicate whether each of the following statements is possibly true or certainly false.

a) The cost-minimizing bundle for y = 50 is l = 10 and K = 40 if labor and capital cost the same, and is l = 12 and K = 37 when labor costs $20 and capital costs $15. (1 point)

b) The cost-minimizing bundle for y = 50 is l = 10 and K = 40 if labor and capital cost $12, and is l = 15 and K = 33 when labor costs $10 and capital costs $15.

i think the first one is possibly true- can you confirm the first part and help with the second? Thanks

Explanation / Answer

Cost minimisation bundle is where,

w/r=K/L

a. When both inputs costs the same, 40 units of capital and 10 units of labor are hired. Now, when cost of capital is more and cost of labor is less, then more of capital and less of labor will be hired than before. So, this statement is possibly false.

b. When both inputs costs the same, 40 units of capital and 10 units of labor are hired. Now, when cost of capital is more and cost of labor is less, then more of capital and less of labor will be hired than before. SO, this statement is true.

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