Production Is an Extremely Complicated Task, So Economists Make a Number

question 18

Multiple Choice

Production is an extremely complicated task, so economists make a number of simplifying assumptions. Which of the following assumptions do economists make in their basic model of producer behavior?
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I. Multiproduct firms: All firms produce at least two goods.
II. Firms only use two inputs in the production process: capital and labor.
III. Cost minimization: Firms attempt to produce a fixed quantity of output at the lowest possible total cost.
IV. Firms can produce more output by using more inputs.

• A) I and IV
• B) I, II, III, and IV
• C) II, III, and IV
• D) I and III