Costs are clearly minimized for a given level of output as long as the firm
A) uses inputs that do not exhibit declining productivity.
B) pays the same price for all of its inputs.
C) is not able to increase output by substituting a dollar's worth of input A for a dollar's worth of input B, or vice versa.
D) can increase output without increasing its cost.
E) equates the marginal products of both inputs A and B.

Question

Quizplus · Accepted Answer

The principle of cost minimization is based on the idea that a firm should produce a given level of output at the lowest possible cost. This can only be achieved if the firm is not able to increase output by substituting a dollar's worth of one input (A) for a dollar's worth of another input (B), or vice versa. If such substitution is possible, the firm would not be producing at the lowest possible cost. Therefore, choice C is the best option as it ensures that costs are minimized for a given level of output.

Costs Are Clearly Minimized for a Given Level of Output