Consider a firm operating in a competitive market and using only one factor of production. If the firm is attempting to maximize profits then we know that for any change in the input and output price, the input choice and output choice must obey the Week Axiom of Profit Maximization: Delta(p)Delta(y) - Delta(w)Delta(x) >0. where p is the price of the output good, w is the price of the input good and x & y are the amounts used and produced of the input and output goods. For each, respond true or false and give a short argument in support of your answer.
a) If the price of the input does not change, then a decrease in the price of the output implies that the firm will produce the same amount or less output.
b) If the output price of the does not change, then a decrease in the input price implies of the firm will use the same amount or more of the input.
c) If both the price of output and input increase and the firm produces less output and the firm will use more of input.
2006-06-20
19:13:46
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3 answers
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asked by
mags_mini
1