A Competitive Firm Produces Its Output According to the Production

question 5

Multiple Choice

A competitive firm produces its output according to the production function y = min{x3, 1000}.Let p be the price of output, and let the price of input x be $1.The profit maximizing output for this firm is

• A)1,000 if p > 1 and 0 otherwise.
• B)10 for all p.
• C)1,000 for all p.
• D)0 if p < 1/100 and 1,000 otherwise.
• E)None of the above.

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Definitions:

Sales Volume

refers to the number of units sold within a reporting period, used as a measure of business performance and market demand.

Variable Costs

Expenses that change in proportion to the production output or sales of a company, such as raw materials and direct labor costs.

Fixed Costs

Costs that do not change with the level of output or sales in the short term, such as rent, salaries, and insurance premiums.

Initial Investment

The sum of money allocated to initiate a project, acquire an asset, or invest in a business operation.