Asked by
Yesha Desai
on Dec 01, 2024
Verified
the production function is f(x1, x2) = x1/21x1/22.If the price of factor 1 is $10 and the price of factor 2 is $20, in what proportions should the firm use factors 1 and 2 if it wants to maximize profits?
A) We can't tell without knowing the price of output.
B) x1 =2x2.
C) x1 = 0.50x2.
D) x1 = x2.
E) x1 = 20x2.
Production Function
An equation or formula that specifies the output a firm can produce with varying combinations of inputs or factors of production.
Proportions
The relative relationship in size, quantity, or degree between two or more things.
Profit
The financial gain achieved when the amount of revenue gained from a business activity exceeds the expenses, costs, and taxes involved in sustaining the activity.
- Become cognizant of the nexus between the investment in inputs, the determination of output prices, and the maximization of profit margins.
- Utilize production function strategies to compute the ideal input quantities for increasing profitability.
- Calculate the optimal concoction of diverse inputs taking into account their corresponding costs and production function.
Verified Answer
SB
Learning Objectives
- Become cognizant of the nexus between the investment in inputs, the determination of output prices, and the maximization of profit margins.
- Utilize production function strategies to compute the ideal input quantities for increasing profitability.
- Calculate the optimal concoction of diverse inputs taking into account their corresponding costs and production function.