Assume that a firm finds that its profits will be maximized (or losses minimized) when it produces $30 worth of product X.Each of these techniques shown in the following table will produce exactly $30 worth of X. (a) Which method is most efficient? Why?
(b) Given the above prices, will the firm adopt a new method, which involves 10 units of land, 3 of labour, 2 of capital, and 2 of entrepreneurial ability?
(c) Suppose the price of capital falls to $1 without any other prices changing.Which of the methods will the firm now choose? Why?

Question

Assume that a firm finds that its profits will be maximized (or losses minimized) when it produces $30 worth of product X.Each of these techniques shown in the following table will produce exactly $30 worth of X.  (a) Which method is most efficient? Why?
(b) Given the above prices, will the firm adopt a new method, which involves 10 units of land, 3 of labour, 2 of capital, and 2 of entrepreneurial ability?
(c) Suppose the price of capital falls to $1 without any other prices changing.Which of the methods will the firm now choose? Why?

Quizplus · Accepted Answer

The Answer of Assume that a firm finds that its profits will be maximized (or losses minimized) when it produces $30 worth of product X.Each of these techniques shown in the following table will produce exactly $30 worth of X.  (a) Which method is most efficient? Why?
(b) Given the above prices, will the firm adopt a new method, which involves 10 units of land, 3 of labour, 2 of capital, and 2 of entrepreneurial ability?
(c) Suppose the price of capital falls to $1 without any other prices changing.Which of the methods will the firm now choose? Why?

Assume That a Firm Finds That Its Profits Will Be