The Cost-Minimizing Rule Is That a Firm Should Utilize Inputs

question 236

Multiple Choice

The cost-minimizing rule is that a firm should utilize inputs such that the marginal physical product of an input divided by the price of the input is the same for all inputs. This is also the profit-maximizing rule because

• A) we obtain the profit-maximizing rule by multiplying each ratio by the marginal revenue produced.
• B) we obtain the profit-maximizing rule by multiplying each ratio by the product price, which is the same for each input.
• C) the profit-maximizing rule is just the inverse of the cost-minimizing rule.
• D) they are exactly the same.

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