A competitive firm uses two variable factors to produce its output, with a production function y = min{ x1, x2 }.The price of x1 is w1 = $8 and the price of x2 is w2 = $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 competitive firm uses two variable factors to produce its output, with a production function y = min{ x1, x2 }.The price of x1 is w1 = $8 and the price of x2 is w2 = $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?
Chapter6: Proudction Costs
Section: Chapter Questions
Problem 8SQ
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A competitive firm uses two variable factors to produce its output, with a production function y = min{ x1, x2 }.The price of x1 is w1 = $8 and the price of x2 is w2 = $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?
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