A Competitive Firm Uses Two Variable Factors to Produce Its

question 30

Multiple Choice

A competitive firm uses two variable factors to produce its output, with a production function q = min{x1, x2}.The price of factor 1 is $4 and the price of factor 2 is $1.Due to a lack of warehouse space, the company cannot use more than 15 units of x1.The firm must pay a fixed cost of $90 if it produces any positive amount but doesn't have to pay this cost if it produces no output.What is the smallest integer price that would make a firm willing to produce a positive amount?

• A)$15
• B)$21
• C)$5
• D)$24
• E)$11

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Definitions:

Sunk Costs

Costs that have already been incurred and cannot be recovered, which should not influence future decisions but often do.

Alternatives

Different options or choices available in any given situation or decision-making process.

Longitudinal Studies

Research methods that involve observations of the same subjects over a period, often years or decades, to determine long-term effects or trends.

Passionate

Exhibiting or characterized by intense feelings of enthusiasm or affection.