A Competitive Firm with Output Y Has a Production Function

A competitive firm with output y has a production function y = , where x1 and x2 are inputs used in production. The firm produces the output minimizing cost. With input prices w1 and w2, which of the following is true?

A) The firm has L-shaped isoquants.
B) The firm must use the cheaper input.
C) The firm must use only input x₁ if w₁ < 2w₂.
D) The technology has increasing returns to scale.
E) More than one of the above is true.

Correct Answer:

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