If a firm's production function is Leontief and the price of capital goes down,the:
A) firm must use less labor in order to minimize the cost of producing a given level of output.
B) firm must use more capital in order to minimize the cost of producing a given level of output.
C) firm must use less capital in order to minimize the cost of producing a given level of output.
D) cost-minimizing combination of capital and labor does not change.

Question

Quizplus · Accepted Answer

In a Leontief production function, inputs are used in fixed proportions to produce output. Therefore, a change in the price of one input (like capital) does not alter the cost-minimizing combination of capital and labor.

If a Firm's Production Function Is Leontief and the Price