A Competitive Firm Produces a Single Output Using Several Inputs

question 24

Multiple Choice

A competitive firm produces a single output using several inputs.The price of output rises by $4 per unit.The price of one of the inputs increases by $4 and the quantity of this input that the firm uses increases by 16 units.The prices of all other inputs stay unchanged.From the weak axiom of profit maximization we can tell that

• A)the inputs of the other factors must have stayed constant.
• B)the inputs of at least one of the other factors must have decreased by at least 16 units.
• C)the output of the good must have increased by at least 16 units.
• D)the output of the good must have decreased by at least 8 units.
• E)the inputs of at least one of the other factors must have increased by at least 16 units.

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Definitions:

Variable Cost

Expenses that change in direct relation to production levels or sales figures.

Depreciation Expense

The methodical distribution of the expense of a physical asset throughout its expected lifespan.

Net Income

Net income is the total profit of a company after all expenses and taxes have been deducted from revenues, indicating the company's financial performance over a specific period.

Variable Costs

Costs that change in proportion to the level of activity or production volume, such as materials and labor.