A Competitive Firm Uses Two Variable Factors to Produce Its

A competitive firm uses two variable factors to produce its output, with a production function q = min{x1, x2}.The price of factor 1 is $8 and the price of factor 2 is $5. Due to a lack of warehouse space, the company cannot use more than 10 units of x1. The firm must pay a fixed cost of $80 if it produces any positive amount but doesn't have to pay this cost if it produces no output. What is the smallest integer price that would make a firm willing to produce a positive amount?

A) $44
B) $41
C) $29
D) $13
E) $21

Correct Answer:

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