A Competitive Firm with Output Y Has a Production Function

question 11

Multiple Choice

A competitive firm with output y has a production function y = (2x₁ + x₂) ^1/2, where x1 and x2 are inputs used in production.The firm produces the output minimizing cost.With input prices w1 and w2, which of the following is true?

• A)The firm has L-shaped isoquants.
• B)The firm must use the cheaper input.
• C)The firm must use only input x₁ if w₁ < 2w₂.
• D)The technology has increasing returns to scale.
• E)More than one of the above is true.

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