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Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383

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BuyFindarrow_forward

Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383
Textbook Problem

Discuss the firm’s objective, its constraints, and how it makes choices in its role as a buyer of resources.

To determine

Firm’s objective, its constraints, and choice making role as a buyer of resources.

Explanation

Each firm’s ultimate objective as a buyer of resources is the maximum utilization of factors and minimizing the cost, thereby achieving profit. The productivity of factors, price of the product, and availability of factors of production and technology are the major constraints in order to achieve their objectives.

In order to achieve their objectives, the firms apply low-cost rule, which is the minimum cost combination of factors where the ratios of marginal product (MP) to the price of factor for both factors are equal...

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