A Firm Uses Only Two Inputs to Produce Its Output

question 17

Multiple Choice

A firm uses only two inputs to produce its output.These inputs are perfect substitutes.This firm

• A)must have increasing returns to scale.
• B)must have constant returns to scale.
• C)could have increasing returns to scale, constant returns to scale, or decreasing returns to scale.
• D)must have decreasing returns to scale.
• E)must have decreasing returns to scale in the short run and constant returns to scale in the long run.

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Definitions:

Tips

Discretionary payments given to service providers by customers, typically as a gesture of thanks for good service.

Statute of Frauds

A legal principle that requires certain types of contracts to be written and signed to be enforceable.

Fixed Duration

A term or period of time that is set and unchangeable, often found in contracts or agreements specifying the length of commitment.

Employment Contract

A legally binding agreement between an employer and an employee that outlines the terms and conditions of employment.