Multiple Choice
A competitive, profit-maximizing firm uses two inputs a and b.Its production function is F(a, b) = a1/2 +a1/2.Its output sells for $5 per unit.The price of input a is $1 per unit.If the price of output rises to $6 per unit but factor prices do not change.
A) it will increase its purchases of factor a by 11/4 units.
B) it will increase its purchases of factor a by 9/4 units.
C) it will increase its purchases of factor a by 3/4 units.
D) we need to know the price of factor b to be able to determine the change in demand for a.
E) None of the above.
Correct Answer:

Verified
Correct Answer:
Verified
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