The expansion path shows
A) how input prices change as the firm's output level changes.
B) how the marginal products change as the firm's output level changes.
C) how the cost-minimizing input choices change as the firm's output level changes.
D) how the profit-maximizing input choices change as the firm's output level changes.
E) how the cost-minimizing input prices change as the firm's output level changes.

Question

Quizplus · Accepted Answer

The expansion path shows how the cost-minimizing input choices change as the firm's output level changes. It depicts a graph of the firm's input combination that minimizes its cost of producing each level of output. It shows the movement from one optimal input combination to another optimal combination as output increases or decreases. The slope of the expansion path represents the firm's MRTS, i.e., how much of one input must be reduced to increase the other input when output remains the same, and gives information on the substitutes between inputs.

The Expansion Path Shows