A Firm Uses a Single Input to Produce Its Output

question 3

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) = 40x - x². If the price of the firm's output is 1, the profit-maximizing amount of input to buy is

• A) 0.
• B) 36.
• C) 18.
• D) 27.
• E) None of the above.

---

Definitions:

Liability

A financial obligation or debt that an individual or company owes to another party.

Asset

An economic resource owned or controlled by an entity that is expected to provide future economic benefits.

Income Summary

An account in the ledger that aggregates all the revenues and expenses for the period, used to transfer net income or loss to owner's equity.

Merchandise Inventory

Goods a company holds for the purpose of sale to customers.