Agricultural firms will adjust the level of input use based on:

Question

Quizplus · Accepted Answer

Agricultural firms will adjust the level of input use based on changes in relative prices, specifically, changes in the prices of inputs relative to the price of output. This is because if the price of an input increases relative to the price of output, it becomes more expensive to produce the same level of output, which may cause the firm to reduce the amount of that input used or switch to a relatively cheaper input. Similarly, if the price of an input decreases relative to the price of output, it becomes less expensive to produce the same level of output, which may cause the firm to increase the amount of that input used or substitute other inputs with the relatively expensive one.

Agricultural Firms Will Adjust the Level of Input Use Based