A Firm Is Operating with an Optimal Combination of Inputs

question 185

Multiple Choice

A firm is operating with an optimal combination of inputs.Suddenly the price of one input rises.The firm should

• A)buy less of that input and more of the other input.
• B)change its input mix so that the marginal physical product of the input whose price has risen falls and the marginal physical product of the other input rises.
• C)buy less of whichever input now has the highest money price and more of the other input.
• D)reduce its output.

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Definitions:

Income Groups

Categories of people classified by their level of income.

Size Of Government

The scope and scale of government activities, including spending, taxation, and regulation, often debated in terms of its impact on the economy and society.

Economic Growth

An increase in the production of goods and services in an economy over a period of time, often measured as the percentage increase in real gross domestic product (GDP).

Living Standards

The level of wealth, comfort, material goods, and necessities available to a person or community.