In the long run,a profit-maximizing firm producing a given level of output chooses the production method that
A)produces that output at the lowest possible cost.
B)maximizes the marginal product of all factors.
C)maximizes the marginal product of labour.
D)leads to a flat total cost curve.
E)minimizes labour input.

Question

Quizplus · Accepted Answer

A profit-maximizing firm producing a given level of output will choose the production method that produces that output at the lowest possible cost. This is because a lower cost of production allows the firm to earn higher profits, ceteris paribus. Maximizing the marginal product of all factors or minimizing labor input may not necessarily lead to the lowest cost of production, and a flat total cost curve indicates constant returns to scale, which may not be the case for all production methods. Therefore, A is the best choice.

In the Long Run,a Profit-Maximizing Firm Producing a Given Level