A Competitive Firm Uses Three Factors of Production

question 13

Multiple Choice

A competitive firm uses three factors of production.Its production function is f (x, y, z) = (x + y) ^1/2 z ^1/2.Originally the factor prices were wx = $1, wy = $2, and wz =$3.The prices of factors x and z decreased to half of their previous levels, but the price of factor y stayed constant.The cost of production

• A)decreased by more than 1/2.
• B)decreased by 1/3.
• C)decreased by exactly 1/2.
• D)stayed constant.
• E)decreased by less than 1/3.

---

Definitions:

Production Technique

A method or process employed in the transformation of raw materials, components, or parts into finished goods ready for the market or subsequent processing.

Demand Curve

A graphical representation showing the relationship between the price of a good and the quantity of the good that consumers are willing and able to purchase at each price level.

Swimwear Market

The industry segment that deals with the production and sale of clothing designed for swimming and related activities.

Government Subsidy

Financial assistance provided by the government to individuals, organizations, or industries to support activities deemed beneficial for the public or economy.