In Problem 11, the Production Function Is F(x₁, X₂)

question 12

Multiple Choice

In Problem 11, the production function is f(x₁, x₂) . If the price of factor 1 is $8 and the price of factor 2 is $4, in what proportions should the firm use factors 1 and 2 if it wants to maximize profits?

• A) We can't tell without knowing the price of output.
• B) x₁ = x₂.
• C) x₁ = 0.50x₂.
• D) x₁ = 2x₂.
• E) x₁ = 4x₂.

---

Definitions:

Operating Costs

Expenses related to the day-to-day functions of a business, excluding direct materials and direct labor costs.

Donut Maker

A kitchen appliance or tool specifically designed for making donuts.

Simple Rate of Return

A calculation that measures the profitability of an investment as a percentage of the original investment, ignoring the time value of money and other factors like cash flows over time.

Annual Donut Sales

The total revenue generated from selling donuts in a one-year period.