A Firm Uses a Single Input to Produce Its Output

question 16

Multiple Choice

A firm uses a single input to produce its output, which is sold in a competitive market. It gets quantity discounts on purchases of its input. If it buys x units of the input, the price it must pay per unit of input is + 4. If it buys no inputs, it doesn't have to pay anything. The firm's production function is f(x) = 60x - x². If the price of the firm's output is 1, the profit-maximizing amount of input to buy is

• A)56.
• B) 0.
• C) 42.
• D) 28.
• E) None of the above.

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Definitions:

Elasticity of Demand

An evaluation of how sensitively the demanded amount of a product responds to changes in price.

Demand Curve

An illustration that depicts the connection between how much of a product consumers want to buy and its cost.

Perfectly Inelastic

A situation in demand where the quantity demanded does not change regardless of the change in price.

Perfectly Elastic

This describes a situation where a small change in price leads to an infinite change in the quantity demanded or supplied.