In a two input scenario, if the price of one input changes,____________ will also change: Group...

In a two input scenario, if the price of one input changes,____________ will also change:

Group of answer choices

the profit

the marginal physical product

the average value product

all of the above

Solutions

Expert Solution

A change in the price of one input in the case of two input scenario will result in change in the rate of substitution between the two inputs. As a result, the input that will become cheaper will be used more as compared to the other input. So, marginal physical product will change, as well as the average physical product. Change in the price of input affects the total cost of production which in turn affects the profit of the firm.

So, in a two input scenario, if the price of one input changes, the profit, the marginal physical product, and the average physical product will also change.

Rahul Sunny answered 2 years ago

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