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

Question

Quizplus · Accepted Answer

A profit-maximizing firm aims to minimize its costs in order to maximize profits. Therefore, it will choose the production method that produces the given level of output at the lowest possible cost, which is option B. Maximizing the marginal product of labour or all factors may not necessarily lead to the lowest cost of production. Similarly, a flat total cost curve or minimizing labour input may not be the most efficient or cost-effective production method.

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