Figure 7-17
-Which of the following statements must be true when a firm makes choices that put it at point A in Figure 7-17?
A)The firm is minimizing its cost of producing 100 units of output.
B)The ratio of the marginal physical products of labor and of land equals the ratio of the prices of labor and of land.
C)The firm first decided how much output to produce and then decided how to produce it.
D)All of the responses are true.

Question

Figure 7-17 
-Which of the following statements must be true when a firm makes choices that put it at point A in Figure 7-17?
A)The firm is minimizing its cost of producing 100 units of output. 
B)The ratio of the marginal physical products of labor and of land equals the ratio of the prices of labor and of land. 
C)The firm first decided how much output to produce and then decided how to produce it. 
D)All of the responses are true.

Quizplus · Accepted Answer

The statements describe the conditions under which a firm is operating efficiently at a given point (in this case, point A in Figure 7-17). A) indicates cost minimization for a specific output level, B) reflects the condition for optimal input combination based on their marginal products and prices (also known as the equality of the marginal rate of technical substitution and the ratio of input prices), and C) suggests the firm's decision-making process aligns with the theory of firm behavior, where output level decisions precede choices on production methods. All these conditions are consistent with efficient and rational firm behavior in economic theory.

Figure 7-17 -Which of the Following Statements Must Be True When a True