A Competitive Firm with Output Y Has a Production Function

question 12

Multiple Choice

A competitive firm with output y has a production function y = , where x1 and x2 are inputs used in production. The firm produces the output minimizing cost. With input prices w1 and w2, which of the following is true?

• A) The firm has L-shaped isoquants.
• B) The firm must use the cheaper input.
• C) The firm must use only input x₁ if w₁ < 2w₂.
• D) The technology has increasing returns to scale.
• E) More than one of the above is true.

---

Definitions:

Qualitative Characteristic

A feature that allows users to assess and compare the financial position, performance, and changes in financial position of an entity, emphasizing non-quantifiable information.

Present Value Analysis

A financial calculation that determines the current worth of a future sum of money or stream of cash flows given a specified rate of return.

Capital Investment

The spending of money to purchase assets or property intended to create growth or profit for a business.

Investment Funds

Pooled funds that collect capital from multiple investors to invest in securities, real estate, or other assets, according to a predetermined strategy.