The firm's expansion path records
A)profit-maximizing output choices for every possible price.
B)cost-minimizing input choices for all possible output levels for when input prices expand along with production.
C)cost-minimizing input choices for all possible output levels for a fixed set of input prices.
D)cost-minimizing input choices for profit-maximizing output levels.

Question

Quizplus · Accepted Answer

The expansion path records the cost-minimizing input choices for all possible output levels for a fixed set of input prices. It shows the relationship between the amount of inputs and the level of output for a specific set of input prices. Therefore, choice C is the correct answer. Choices A and D are incorrect because the expansion path does not indicate profit-maximizing output choices or cost-minimizing input choices for profit-maximizing output levels. Choice B is also incorrect because it describes the expansion path under the assumption that input prices expand along with production, which is not the case on the expansion path.

The Firm's Expansion Path Records