Solved: Suppose that the price of factor 2 increases from 3 to 6, Business Management

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Suppose that the price of factor 2 increases from 3 to 6

A firm has two variable factors and a production function y=f(x₁,x₂)=(x₁+4x₂)^1/2. The price of output good is $4 and the price of factor 1 is $1. Suppose that the price of factor 2 increases from $3 to $6. What happens to the profit maximizing output?

a)output decreases by 15/9

b)output decreases by 10/3

c)output decreases by 2/3

d)output increases by 2/9

e)output increases by 2

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Business Management: Suppose that the price of factor 2 increases from 3 to 6

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Business Management: Suppose that the price of factor 2 increases from 3 to 6

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