Assuming that the inputs a and b are perfect substitutes and MPa/Pa < MPb/Pb, the firm...
Assuming that the inputs a and b are perfect substitutes and MPa/Pa < MPb/Pb, the firm can attain optimal input combination by: (you may choose more than one answer)
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a) using more a and less b. |
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b) using less a and more b. |
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c) using only a. |
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d) using only b. |
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e) using both the inputs, a and b. |
Homework Answers
MPa/Pa < MPb/Pb USING ONLY B
since the goods are substitutable, the cheaper good would be preferred.
since according to the given condition the marginal Productivity per unit of price of A is less than that of B, thus the firm will ONLY USE B.
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