If a firm is maximizing profit, then it must be employing a combination of inputs that is on its expansion path.

Question

Quizplus · Accepted Answer

The expansion path represents the combination of inputs that minimizes cost for every level of output. When a firm is maximizing profit, it chooses the combination of inputs that produces a given output at the lowest possible cost, which means it is operating on its expansion path.

If a Firm Is Maximizing Profit, Then It Must Be