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.

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Definitions:

Sellers

Individuals or entities that offer goods or services for sale to consumers or other businesses.

Smart Cards

Portable memory cards with embedded integrated circuits that are capable of processing and storing data, and securely managing, transferring, and communicating information.

Magnetic Stripe

A strip of magnetic tape used to store data, commonly found on the back of cards such as credit and debit cards, allowing them to be read by swiping through a magnetic reading device.

Backward Compatibility

The ability of a system or technology to work with older legacy systems, or accept input designed for an older system.