A Profit-Maximizing Competitive Firm Uses Just One Input, X

question 20

Multiple Choice

A profit-maximizing competitive firm uses just one input, x. Its production function is q = 8 . The price of output is $24 and the factor price is $8. The amount of the factor that the firm demands is

• A)11
• B)128
• C)144
• D) 27.71.
• E) None of the above.

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Definitions:

Aggregate Expenditure Line

A curve or line that depicts the total spending (consumption, investment, government spending, and net exports) in the economy at different levels of income.

Income Level

An individual's or household's economic status determined by the amount of income generated from wages, investments, and other sources.

Income-Expenditure Model

An economic model that represents the equilibrium level of income or output determined by the intersection of aggregate demand and aggregate supply.

Marginal Propensity

The incremental change in spending (consumption or saving) that occurs with a change in disposable income.