A Change in the Relative Price of an Input in the Cost

question 77

Multiple Choice

A change in the relative price of an input in the cost minimization problem:

• A)leads to an increase in the use of the cheaper input.
• B)leads to less output being produced.
• C)leads to more output being produced.
• D)leads to higher profits.

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Definitions:

Marginal Cost

The cost added by producing one additional unit of a product or service, a crucial concept in economics for understanding optimization.

Marginal Product

The increase in output derived from the addition of one unit of a certain input, with all other inputs held steady.

Diminishing Marginal Product

The principle where the incremental output of a production process decreases as the amount of a single factor of production is incrementally increased, holding all other factors constant.

Inverted Production Function

A concept where inputs and outputs in a production process are reversed in analysis, possibly examining the relationship of output levels to required inputs.