A Competitive Firm Uses Two Variable Factors to Produce Its

question 31

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 $5.Due to a lack of warehouse space, the company cannot use more than 17 units of x1.The firm must pay a fixed cost of $136 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)$36
• B)$33
• C)$21
• D)$9
• E)$17

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Definitions:

Stackelberg Model

A strategic game in economics where one firm, the leader, sets its output level first, and then the follower firms set their output levels, taking the leader's output as given.

Oligopoly Model

An economic model that describes a market structure in which a few firms dominate the industry and have the ability to influence prices and market outcomes.

Competitive Market

A market structure in which many firms offer products or services that are similar, leading to high levels of competition.

Remarkable Healing

Significant or extraordinary recovery from illness or injury.