A Competitive Firm Uses Two Inputs and Has a Production

question 26

Multiple Choice

A competitive firm uses two inputs and has a production function f(x1, x2) =8x.25 1x.25 2.The firm can buy as much of either factor as it likes at factor prices w1 = w2 = $1.The cost of producing y units of output for this firm is

• A)8(x1 + x2)y.
• B)2(y/8)2.
• C)(x1 + x2)/8.
• D)y/16.
• E)y₂/16.

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Definitions:

Specialization and Exchange

This concept depicts how individuals, firms, and nations can increase their productivity through specialization in tasks they perform best and exchanging their outputs for other goods and services.

Modern Economies

Economic systems that are characterized by dynamic industrial, technological, and service sectors, often with complex financial and regulatory frameworks.

Specialization

Specialization refers to the process of focusing effort and resources on the production of a particular product or a limited scope of products, leading to increased efficiency.

Specialization and Trade

The economic strategy where individuals or nations focus on producing specific goods or services and exchange them, increasing efficiency and wealth.