A Competitive Firm Produces a Single Output Using Several Inputs

question 1

Multiple Choice

A competitive firm produces a single output using several inputs.The price of output rises by $3 per unit.The price of one of the inputs increases by $6 and the quantity of this input that the firm uses increases by 12 units.The prices of all other inputs stay unchanged.From the weak axiom of profit maximization we can tell that

• A)the output of the good must have increased by at least 24 units.
• B)the inputs of the other factors must have stayed constant.
• C)the output of the good must have decreased by at least 12 units.
• D)the inputs of at least one of the other factors must have decreased by at least 12 units.
• E)the inputs of at least one of the other factors must have increased by at least 12 units.

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Definitions:

Market Demand Curve

A graphical representation that shows the relationship between the price of a good and the total quantity demanded by all consumers in the market.

Horizontally Summing

The process of adding demand or supply curves across different markets or individuals to get a cumulative total.

Demand Curves

Graphical representations showing the relationship between the price of a product and the quantity of the product that consumers are willing to buy.

Inferior Good

A type of good for which demand decreases as the income of consumers increases, opposite to normal goods.