If a Firm's Production Function Is Leontief and the Wage

question 126

Multiple Choice

If a firm's production function is Leontief and the wage rate goes up,the:

• A) firm must use more labor in order to minimize the cost of producing a given level of output.
• B) firm must use more capital in order to minimize the cost of producing a given level of output.
• C) firm must use less labor in order to minimize the cost of producing a given level of output.
• D) cost minimizing combination of capital and labor does not change.

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Definitions:

Fixed Costs

Fixed costs are business expenses that do not change regardless of the level of goods or services produced, such as rent, salaries, and insurance premiums.

Total Revenue

The total amount of money generated by a company from its business activities, such as sales of goods or services, before any expenses are subtracted.

Mass Customization

A manufacturing approach that allows for the personalization of products to meet individual customer needs at near mass production prices.

Institutional Buyers

Large organizations such as mutual funds, pension funds, and insurance companies that buy or sell large quantities of securities or goods.