The Production Function Is F(x₁, X₂)=x^1/2₁x^1/2₂

question 16

Multiple Choice

the production function is f(x₁, x₂) =x^1/2₁x^1/2₂.If the price of factor 1 is $14 and the price of factor 2 is $7, in what proportions should the firm use factors 1 and 2 if it wants to maximize profits?

• A)x₁ = 0.50x₂.
• B)x₁ =x₂.
• C)We can't tell without knowing the price of output.
• D)x₁ = 2x₂.
• E)x₁ =7x₂.

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Definitions:

Losers

This term can refer to individuals or entities that do not succeed in a specific endeavor, competition, or economic situation.

Comparative Advantage

The ability of an individual, firm, or country to produce a good or service at a lower opportunity cost than competitors, leading to potential trade benefits.

Specialize

To focus on a specific area of expertise or production, often to increase efficiency or achieve a higher level of skill in that domain.

Producers Worse Off

A situation where producers face decreased profitability or increased costs due to economic changes.