A Competitive Firm Uses Two Variable Factors to Produce Its

question 23

Multiple Choice

A competitive firm uses two variable factors to produce its output, with a production function q = min{x1, x2}.The price of factor 1 is $4 and the price of factor 2 is $1. Due to a lack of warehouse space, the company cannot use more than 15 units of x1. The firm must pay a fixed cost of $90 if it produces any positive amount but doesn't have to pay this cost if it produces no output. What is the smallest integer price that would make a firm willing to produce a positive amount?

• A) $15
• B) $21
• C) $5
• D) $24
• E) $11

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Definitions:

Handwritten Instrument

A legal document that is manually written by hand rather than typed or printed.

Negotiable

Pertains to documents or instruments that are transferable from one person to another through endorsement or delivery, thereby allowing the holder to take title.

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A term describing instruments or securities that cannot be transferred or assigned to another party.

Duress

A condition in which a person performs an act as a result of violence, threat, or other pressure against the person.