Suppose That a Firm Uses Only Two Inputs in Its

question 47

Multiple Choice

Suppose that a firm uses only two inputs in its production process. The ratio of the marginal products of these inputs always exceeds the ratio of the prices of the inputs. What can you say about the cost-minimizing point of the firm?

• A)It is an interior solution.
• B)A cost-minimizing point must not exist.
• C)If a cost-minimizing point exists, it must be at a corner.
• D)Costs must be negative at the cost-minimizing point.

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Definitions:

Extended Inventory

An expanded list of goods and materials kept on hand by a business, including raw materials, work-in-progress, and finished goods.

Decrease Retailer Prices

A strategy where retailers lower the prices of goods or services, potentially to increase sales volume or clear inventory.

Vertical Contracts

Arrangements between companies at different levels in the supply chain, such as manufacturers and retailers, to control the supply and price of products.

Benefits

Advantages or favorable outcomes resulting from specific actions, policies, or circumstances.