Asked by Bianca LaForteza on May 16, 2024
Verified
The conditional factor demand function for factor 1 is a function x1(w1, w2, y)that tells the ratio of price to output for an optimal factor choice of the firm.
Conditional Factor Demand Function
Represents the quantity of an input demanded at each level of output, prices of inputs, and technology, given the firm's optimization behavior.
Optimal Factor Choice
A decision-making process in which a firm determines the most efficient combination of factors of production (labor, capital, etc.) to maximize output or minimize costs.
- Recognize the relationship between production function features and cost function characteristics.
Verified Answer
SN
Sophia NichollsMay 20, 2024
Final Answer :
False
Explanation :
The conditional factor demand function for factor 1 tells the optimal quantity of factor 1 to be used by the firm, given the prices of factor 1 and factor 2 and the level of output. It does not give the ratio of price to output.
Learning Objectives
- Recognize the relationship between production function features and cost function characteristics.