The firm uses the following function to calculate the production out (PO) : PO = 5.3C² L¹⁵, where C = capital invested and L = labour employed. If the capital invested (C) increases by 20 percent, the change in PO will be :

A. 20% decrease

B. 32% increase

C. 44% increase

D. 56% increase

Answer: Option C

Solution(By Examveda Team)

PO_initial = 5.3C² L¹⁵
PO_new = 5.3 (1.2C)² L¹⁵
= 1.44 (5.3C² L¹⁵)
= 1.44PO_initial
Increase in PO = 0.44PO_initial
∴ Increase % = (0.44 × 100)% = 44%