A Competitive Firm Uses Two Variable Factors to Produce Its

question 46

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 $8 and the price of factor 2 is $5.Due to a lack of warehouse space, the company cannot use more than 10 units of x1.The firm must pay a fixed cost of $80 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)$44
• B)$41
• C)$29
• D)$13
• E)$21

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Definitions:

Divisional Segment Margin

The profit margin achieved by a specific division or segment of a company, indicating the profitability of that division.

Net Operating Income

The profit derived from a company's regular business operations, excluding deductions for interest and taxes.

Variable Costing

An approach in accounting where only direct materials, direct labor, and variable manufacturing overhead costs are considered in calculating the cost of products.

Net Operating Income

The total profit of a company after operating expenses are deducted, but before interests and taxes are subtracted.