If a firm's production function is Leontief and the wage rate goes up,the:
A) firm must use more labor in order to minimize the cost of producing a given level of output.
B) firm must use more capital in order to minimize the cost of producing a given level of output.
C) firm must use less labor in order to minimize the cost of producing a given level of output.
D) cost minimizing combination of capital and labor does not change.

Question

Quizplus · Accepted Answer

In a Leontief production function, inputs are used in fixed proportions to produce output. Therefore, if the wage rate goes up, the cost-minimizing combination of capital and labor does not change because the firm cannot substitute between labor and capital.

If a Firm's Production Function Is Leontief and the Wage