A Competitive Firm Uses Two Variable Factors to Produce Its

question 35

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 $5. Due to a lack of warehouse space, the company cannot use more than 17 units of x1. The firm must pay a fixed cost of $136 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) $36
• B) $33
• C) $21
• D) $9
• E) $17

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Definitions:

Consistency

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