A Firm Has the Production Function F(x, Y) = X

question 5

Multiple Choice

A firm has the production function f(x, y) = x.₅ + y, where x is the amount of factor x it uses and y is the amount of factor y. On a diagram we put x on the horizontal axis and y on the vertical axis. We draw some isoquants. Now we draw a straight line on the graph and we notice that the slopes of all the isoquants that it meets have the same slope at the point where they meet this line. The straight line we drew was

• A) vertical.
• B) horizontal.
• C) diagonal through the origin with slope 0.5.
• D) diagonal with slope 2.
• E) diagonal with slope greater than 2.

---

Definitions:

Monotonic Transformation

A mathematical operation applied to a function that preserves the order of the data.

Utility Function

An equation that calculates the total utility a consumer gains from consuming a certain quantity of goods and services.

Indifference Curves

Graphical representations of all the combinations of goods and services that provide equal satisfaction to a consumer.

Income

The monetary return or earnings received by an individual or entity, often measured on a regular basis, such as monthly or annually.