All points on the firm's expansion path
A) give the firm the maximum possible profit.
B) minimize the firm's cost of producing some level of output.
C) have the same long-run average cost.
D) make the marginal product of labor equal to the marginal product of capital.

Question

Quizplus · Accepted Answer

The firm's expansion path shows the combination of inputs that minimizes the cost of producing any given level of output, hence B is correct. It does not necessarily imply maximum profit (A), equal long-run average cost (C), or equal marginal products of labor and capital (D).

All Points on the Firm's Expansion Path