In Problem 11, the production function is f(x1, x2) . If the price of factor 1 is $8 and the price of factor 2 is $16, in what proportions should the firm use factors 1 and 2 if it wants to maximize profits?
A) x1 = x2.
B) x1 = 0.50x2.
C) x1 = 2x2.
D) We can't tell without knowing the price of output.
E) x1 = 16x2.
Correct Answer:
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