A Competitive Firm Produces a Single Output Using Several Inputs

question 14

Multiple Choice

A competitive firm produces a single output using several inputs.The price of output rises by $4 per unit.The price of one of the inputs increases by $2 and the quantity of this input that the firm uses increases by 8 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 4 units.
• B)the inputs of the other factors must have stayed constant.
• C)the output of the good must have decreased by at least 2 units.
• D)the inputs of at least one of the other factors must have decreased by at least 8 units.
• E)the inputs of at least one of the other factors must have increased by at least 8 units.

---

Definitions:

Debt Levels

The total amount of borrowing, represented as a ratio of debt to equity or a total dollar amount.

Excessive Risk

Engaging in financial activities that have a high chance of resulting in significant loss.

Operating Leverage

A measure of how revenue growth translates into growth in operating income, indicating the degree to which a firm can increase profits by increasing sales.

Degree of Operating Leverage

A measure of how revenue growth translates into growth in operating income, indicating the level of fixed versus variable costs.