The output- expansion path connects the cost- minimizing input- bundles that:
A)are generated as input- prices fall.
B)can produce various levels of output at a constant TC.
C)can produce expanded levels of output.
D)are generated as output is expanded and input- prices are constant.

Question

Quizplus · Accepted Answer

The expansion path represents the cost-minimizing input bundles at different levels of output, assuming that input prices remain constant. Therefore, as output expands and input prices remain the same, the firm will continue to move along the expansion path to reach the new cost-minimizing input bundle for the expanded level of output. Choices A and B are incorrect because they assume changes in input prices or total cost, which are not accounted for in the expansion path. Choice C is also incorrect because it assumes that the input bundle can produce any level of output, regardless of the input prices or total cost.

The Output- Expansion Path Connects the Cost- Minimizing Input- Bundles